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FOREX: USD/JPY Fades Off Highs as Global Equity Pullback Persists

FOREX
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  • Currency markets are trading on a more stable footing early Friday, with the pullback in US equity markets into the Thursday close and the extension this morning underpinning a recovery for the JPY. The moves stem from Powell's relatively hawkish appearance in Dallas yesterday, at which he noted the US economy's persistent strength - lessening the expectations of further rate hikes through 2025.
  • As a result, USD/JPY has faded back below the Y156.00 handle, reversing the USD-led rally into the close. While the pair is weaker, the overriding uptrend triggered by the Presidential election remains intact, and a buy-on-dips strategy would target the cycle highs at 156.75 as well as the 76.4% retracement for the downleg posted off the July high.
  • Monthly UK GDP data came in softer against expectations, and while GBP is again weaker, pullbacks are limited at these levels and the prospect of a December BoE rate cut remains unlikely - OIS markets priced ~4bps of cuts into year-end, leaving the February or March meetings as the next likely easing move. EUR/GBP touched a new weekly high this morning at 0.8350, with the 50-dma sitting just above as next resistance at 0.8362.
  • Focus for the session ahead rests on US retail sales and import/export price indices data, as well as the October industrial production release. Central bank speakers include Fed's Goolsbee, Collins, Williams and Barkin, while ECB's Panetta, Lane and Cipollone are set to speak.
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  • Currency markets are trading on a more stable footing early Friday, with the pullback in US equity markets into the Thursday close and the extension this morning underpinning a recovery for the JPY. The moves stem from Powell's relatively hawkish appearance in Dallas yesterday, at which he noted the US economy's persistent strength - lessening the expectations of further rate hikes through 2025.
  • As a result, USD/JPY has faded back below the Y156.00 handle, reversing the USD-led rally into the close. While the pair is weaker, the overriding uptrend triggered by the Presidential election remains intact, and a buy-on-dips strategy would target the cycle highs at 156.75 as well as the 76.4% retracement for the downleg posted off the July high.
  • Monthly UK GDP data came in softer against expectations, and while GBP is again weaker, pullbacks are limited at these levels and the prospect of a December BoE rate cut remains unlikely - OIS markets priced ~4bps of cuts into year-end, leaving the February or March meetings as the next likely easing move. EUR/GBP touched a new weekly high this morning at 0.8350, with the 50-dma sitting just above as next resistance at 0.8362.
  • Focus for the session ahead rests on US retail sales and import/export price indices data, as well as the October industrial production release. Central bank speakers include Fed's Goolsbee, Collins, Williams and Barkin, while ECB's Panetta, Lane and Cipollone are set to speak.