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The U.S. dollar trended lower on Wednesday, pressured by falling U.S. Treasury rates. This occurred despite Federal Reserve Chair Jerome Powell indicating during his Semiannual monetary policy report to Congress that policymakers are in no rush to start lowering borrowing costs.
In this appearance before the House Financial Services Committee, the FOMC chief reiterated that the Fed does not believe it would be appropriate to cut rates until it has gained greater confidence that inflation is moving sustainably toward 2.0%.
Although Powell’s remarks leaned towards the hawkish side, they were nothing new: they merely echoed the sentiment expressed in the previous central bank meeting. In this context, traders took today’s developments as “no news is good news”, giving little incentive to yields and greenback’s bulls to charge.
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With Powell’s testimony in the rearview mirror, the focus now shifts to Friday’s highly anticipated U.S. jobs report. Expectations suggest that U.S. employers added 200,000 workers in February, but an upside surprise should not be ruled out; after all, recent employment data have tended to beat estimates.
A surprisingly strong NFP report could trigger a shift in market pricing, convincing skeptical traders that the Fed will indeed wait longer before removing policy restriction. The possibility of a delayed easing cycle could lead to an upward move in the U.S. dollar and yields, reversing today’s market direction.
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USD/JPY FORECAST – TECHNICAL ANALYSIS
Following a short phase of sideways consolidation, USD/JPY broke down to the downside, dipping beneath support at 149.70. Should this breakdown be validated by a daily candlestick, sellers are likely to set their sights on 148.90. Further weakness could draw attention to 147.50.
Conversely, should buyers stage a comeback and reclaim the 149.70 region, upward momentum could pick up traction, paving the way for an advance towards the horizontal resistance at 150.85. Although overcoming this barrier might pose a challenge for bulls, a breakout could signal a rally towards 152.00.
USD/JPY PRICE ACTION CHART
USD/JPY Chart Created Using TradingView
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| Change in | Longs | Shorts | OI |
| Daily | 25% | -26% | -5% |
| Weekly | 41% | -32% | -4% |
USD/CAD FORECAST – TECHNICAL ANALYSIS
USD/CAD suffered an important setback, plunging sharply on Wednesday and breaching a critical support zone extending from 1.3545 to 1.3535. If prices finish the week below this range, a potential move towards the 200-day SMA at 1.3475 may be in store, with a focus thereafter on the 1.3450 level.
On the flip side, if prices unexpectedly reverse course and push past the 1.3535/1.3555 area, heightened buying interest may reemerge, laying the groundwork for a possible rally towards 1.3600. Further gains could bring 1.3620 into play, the 61.8% Fibonacci retracement of the November/December 2023 slump.