USDInd to surpass the 50-day SMA?

It’s been a much quieter week in markets after the hectic recent schedule which included soft US activity data, as well as more dovish central bank meetings.

Chief among these was the Fed, which caused surging Treasury yields to reverse sharply. Money markets have adjusted their expectations of US interest rates.

There is now just a 14.6% chance of one more rate hike in January, before rate cuts start in the middle of next year.

We’ve heard from lots of central bankers in recent days. Fed officials have generally been inclined to push back slightly against the market reaction of the recent meeting.

Chair Powell speaks later today at a panel discussion at the IMF conference. He could certainly sway the direction of the dollar.

• If he endorses the idea that his and the central bank’s work is now done, then the greenback could resume the sell-off from last Friday.
   
• But if he joins the ranks of officials emphasising the ongoing inflation battle and leaving all options open for the December FOMC meeting, then the dollar index could edge up to recent highs.

GBP deals with mixed BoE commentary

Sterling mirrored the euro yesterday and pared its losses during the day.

Comments from Bank of England officials have grabbed the market’s attention. BoE Governor Bailey said it was too early to talk about rate cuts.

But that came after the bank’s Chief Economist Pill suggested earlier in the week that market pricing for cuts by August next year was not “unreasonable”.

Downside pressure could be easing on GBP/USD.

Cable is trying to hold above its 50-day SMA at 1.2275. But it faces initial resistance is at 1.2337.

Monday’s high touched the 200-day SMA at 1.2433 before a sharp retracement.

USD/JPY trades above 151

USD/JPY moved higher for a third day yesterday edging closer to recent highs at 151.054.

BoJ Governor Ueda said earlier today that unwinding ultra-loose policy is a serious challenge.

He also stated the bank doesn't necessarily need to wait until real wages actually turn positive in exiting YCC and negative rates.

Economists have been hoping the bank will embark on policy normalisation soon, but policymakers have been more cautious.

Last October’s top in USD/JPY when the Japanese authorities intervened in the currency sits at 151.706.

The finance ministry spent $70 billion at that time, so markets are no doubt on watch for more intervention noises if we get closer to that level.