It seemed like markets were content to wait on the US CPI data and Fed decision next week, so it definitely caught me by surprise that there was quite a modest reaction to the weekly initial jobless claims data here:
The reading was the highest since October 2021 and prompted markets to pare bets of a 25 bps rate hike. The odds for that dropped from roughly 31% to 25% in the aftermath. Even though it could be a sign that traders are looking more confident that the Fed will stay pat, I would argue that a lot will still come down to next week’s inflation report.
In any case, the dollar was dealt a blow in trading yesterday and the technical implications are quite interesting now.
EUR/USD is working its way back towards 1.0800 and a break above that and its 100-day moving average of 1.0807 will see buyers resume a more bullish bias in the pair. Meanwhile, GBP/USD is near one-month highs above 1.2500 and if next week’s main events work against the dollar, then the pair could be targeting the May highs of 1.2668-80 again.
USD/JPY was also dragged back below 140.00 with sellers testing waters below 139.00, before keeping just a little higher today at around 139.30. That said, the pair is still largely subject to the mood in the bond market as seen below:
USD/JPY vs US Treasury 10-year yields hourly chart
Then, we still have USD/CAD which is taking a run at key trendline support around 1.3335 as outlined here yesterday. And then we’re seeing AUD/USD hold just above its 200-day moving average, seen at 0.6689 currently, after the push higher yesterday:
AUD/USD daily chart
However, buyers still have more work to do to claim the next upside leg breakout with the 100-day moving average (red line) at 0.6739 still the key resistance level to watch.