The U.S. Dollar Declines as Fed's Stance Comes into Question; USD/JPY, USD/CAD Analysis Before NFP
During his appearance before the House Financial Services Committee, the FOMC chief reiterated the Fed's stance that rate cuts would not be appropriate until there is more confidence in inflation moving sustainably towards 2.0%.
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3/7/20242 min read
The U.S. Dollar Declines as Fed's Stance Comes into Question; USD/JPY, USD/CAD Analysis Before NFP
The U.S. dollar saw a decline on Wednesday, influenced by decreasing U.S. Treasury rates. Despite Federal Reserve Chair Jerome Powell's indications during his Semiannual monetary policy report to Congress that policymakers are not eager to initiate rate cuts, the dollar faced pressure.
During his appearance before the House Financial Services Committee, the FOMC chief reiterated the Fed's stance that rate cuts would not be appropriate until there is more confidence in inflation moving sustainably towards 2.0%.
While Powell's comments hinted at a hawkish tone, they were not groundbreaking and merely echoed sentiments from previous central bank meetings. Consequently, traders interpreted today's developments as neutral, offering little motivation for yields and dollar bulls to take charge.
With Powell's testimony concluded, attention now shifts to Friday's highly anticipated U.S. jobs report. Expectations point to the addition of 200,000 workers in February, but an upside surprise cannot be ruled out given recent employment data trends. A stronger-than-expected NFP report could alter market pricing, convincing skeptical traders that the Fed will delay policy tightening. This could potentially lead to an upward movement in the U.S. dollar and yields, reversing the day's market direction.
USD/JPY Forecast - Technical Analysis
After a brief period of sideways consolidation, USD/JPY broke downwards, falling below support at 149.70. If this breakdown is confirmed by a daily candlestick, sellers may target 148.90 next, with further weakness possibly leading to 147.50.
Alternatively, if buyers manage to reclaim the 149.70 level, upward momentum could strengthen, potentially pushing the pair towards the horizontal resistance at 150.85. Overcoming this barrier might pose a challenge, but a breakout could signal a rally towards 152.00.
USD/JPY PRICE ACTION CHART
USD/CAD Forecast - Technical Analysis
USD/CAD experienced a significant decline on Wednesday, breaking through a critical support zone between 1.3545 and 1.3535. If prices end the week below this range, a move towards the 200-day SMA at 1.3475 could be anticipated, followed by a focus on the 1.3450 level.
However, if prices unexpectedly reverse course and surpass the 1.3535/1.3555 area, renewed buying interest may emerge, potentially paving the way for a rally towards 1.3600. Further gains could target 1.3620, the 61.8% Fibonacci retracement of the November/December 2023 decline.