Dollar Plunges On Suspected JPY Intervention
BOJ Intervention?
The US Dollar is falling sharply today ahead of the keenly awaited June NFP release this afternoon. The downside action looks linked to the strong rally we’re seeing in JPY today which is attracting speculation of intervention from Japanese authorities. Today had been flagged as a strong candidate for the BOJ to intervene in FX markets given the continued depreciation we’ve seen in JPY recently, taking USDJPY to its highest level in 40 years. However, it is unclear so far whether the current move is due to intervention or simply to nervous traders jumping the gun ahead of the NFP.
Warsh Comments
USD is also deriving some downside bias on the back of Warsh’s Sintra comments yesterday. The new Fed chair steered clear of any forward guidance and actually spoke about the downfalls of forward guidance as a monetary policy tool. Bulls were clearly left disappointed by this with USD selling off accordingly.
NFP On Watch
For the Dollar, today’s NFP release should prove make-or-break for near-term Fed tightening expectations. Market pricing for a hike by year end is currently around the 80% level meaning that if today’s release comes in strong, there is room for that pricing to lift again, pushing USD higher with it. On the other hand, if today’s data undershoots forecasts, there is room for rate hike expectations to cool sharply, dragging USD down deeper.
Technical Views
DXY
The index continues to pull back below the 101.17 level in line with cooling momentum studies readings. While price holds above the 100-mark, however, focus is on a continuation higher. If we break sub-100, 97.77 is the deeper support for bears to target.
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