Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

FX Watch: US dollar back at 200-day MA, USD/JPY nearing resistance confluence

We look at the US dollar index and USD/JPY in today’s FX Watch.

Forex currencies Source: Adobe images

US economic resilience supports a less dovish Fed rate path

Following three straight months of upside surprises in US retail sales, the September data release overnight added to the fourth. US consumers continue to reflect strong resolve in spending, with headline retail sales outperforming estimates at 0.4% (est 0.3%), while the core read crushed expectations at 0.5% (est 0.1%). With consumer spending accounting for about 65 - 70% of the US gross domestic product (GDP), the Atlanta Federal Reserve (Fed) GDPNow now sees Q3 GDP growth at 3.4% rate, up from previous 3.1%.

Coupled with the recent blowout job report and higher-than-expected consumer inflation data, the recent trend of upside economic surprises made the Fed’s 50 basis point (bp) in September looks like an overreaction. Policymakers will likely have to tread carefully in its rate-easing path ahead to avoid an inflation resurgence, with economic data leaning more and more towards putting the easing process on pause. For now, steps of 25 bp cuts over the next few meetings remain anchored as the market consensus, but another blowout jobs data for November could likely challenge that.

US dollar index: back to retest its 200-day MA

The significant beat in US retail sales saw US Treasury yields edge higher, giving the US dollar further reason to extend its gains overnight. This brought the US dollar back to retest its 200-day moving average (MA), which may offer some near-term resistance, along with its overbought technical conditions on the daily relative strength index (RSI). Nevertheless, any dips may leave the formation of any higher low on watch, with support to watch at the 102.30 level where an upward support trendline stands.

US Dollar Basket Source: IG charts

USD/JPY: resistance confluence at the 151.95 level on watch

A close to 7% rally in the USD/JPY over the past month has left the pair just 1.3% away from a key resistance confluence at the 151.95 level. This is where an upward trendline may serve as a hurdle to overcome, coupled with its 200-day MA and a horizontal resistance. The next Bank of Japan (BoJ) meeting will be held on 30 - 31 October. While policy settings are unlikely to change in the upcoming meeting, market expectations are for another rate hike in December. Key focus will be on whether policymakers will lay the groundwork for a December move, with any indication of upcoming hikes likely to bring some hawkishness back on the table following policymakers’ previous cautious tone.

USD/JPY Mini Source: IG charts

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get commission from just 0.08% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.