Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

FX Watch: US dollar struggled amid dovish Fed, USD/JPY back at key trendline support

The case for a September rate cut was cemented by the US Fed overnight, with Fed Chair Jerome Powell offering himself some policy flexibility by laying out the condition that inflation data continues to be “encouraging” ahead.

USD Source: Getty

Round-up

The case for a September rate cut was cemented by the US Federal Reserve (Fed) overnight, with Fed Chair Jerome Powell offering himself some policy flexibility by laying out the condition that inflation data continues to be “encouraging” ahead. Tints of dovishness were found in his comments that inflation and labour data continue to move into better balance and more good data would further strengthen their confidence.

The hopes of impending monetary policy easing, along with revived traction into artificial intelligence (AI) stocks, were sufficient to fuel a 3% gain in the Nasdaq 100 index. Chip stocks were the clear outrunners, with Nvidia recovering 12.8% overnight, AMD was up 4.4% and Broadcom was up 12.0%. Thus far, corporate earnings have been delivering as well, which helped to support views of a continuation of the broader upward trend in the major indices.

US dollar struggled amid lower Treasury yields

A dip in US Treasury yields amid a dovish Fed has dragged the US dollar to its lowest level in almost two weeks. While dip buyers are attempting to hold an upward trendline support, earlier bounces from the trendline have been short-lived as a peak in the US interest rate environment is very much in sight. For now, its daily relative strength index (RSI) has found some resistance at its mid-line lately, which denotes a weaker showing from buyers.

Any move below its July low at the 103.40 level will likely pave the way for the US dollar to retest the 102.00 level next. On the upside, any near-term bounce may find resistance at the 105.60 level, which has capped the US dollar on two previous occasions.

US Dollar Basket Source: IG charts

USD/JPY back at primary trendline support

Recent guidance from the Bank of Japan (BoJ) seems to open the door for further normalisation ahead, which kept the US-Japan policy divergence in play. With that, narrowing bond yield differentials has offered a headwind for USD/JPY bulls to address, as the attractiveness in the once-favoured carry trade continue to fade.

The USD/JPY has retraced as much as 8% over the past three weeks, but some attempt to stabilise may be in sight. This comes as the pair found some dip-buying at a primary upward trendline support around the 148.60 level, while technical conditions trade at extreme oversold levels, which called for some calm. Any bounce may potentially find immediate resistance at the 151.95 level, where a 23.6% Fibonacci retracement level stands from its recent dip.

USD/JPY Mini Source: IG charts

The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

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.