USD/JPY, unable to break above 147.00, retreats below 146.00

• Limited below 1457.00, the dollar drops for the third consecutive day.
• The greenback weakens as the market assumes a Fed pivot.
• USD/JPY: A decline to 144.00 is increasingly likely – UOB.

The US dollar’s recovery attempt from multi-week lows at 145.00 area witnessed during Thursday’s European morning trade, was capped at 147.00 and the pair pulled lower afterward returning below 146.00 at the time of writing.

Fed pivot expectations keep weighing on the USD

The pair is 0.3% down on the day, on track to close a three-day reversal, its worst performance since late July, as investors start to price in a slowdown on Federal Reserve’s monetary tightening pace. A recent set of disappointing macroeconomic data has raised the alarm about the potential negative effect of an aggressive rate hiking path that has propelled the US dollar about 20% higher over the current year.

The bank is widely expected to hike rates by 75 basis points next week, however, there is growing market speculation about a slowdown to a 0.50% hike in December’s meeting.

In the macroeconomic front, the upbeat US Gross Domestic Product, which bounced up at an unexpected 2.6% annual pace, after two consecutive contractions in the previous quarters, has failed to provide any relevant support to the USD.

USD/JPY: Further decline to 144.00 seems possible – UOB

FX analysts at UOB observe further downside potential in the pair, although still limited at 144.00: “Yesterday (26 Oct), USD lost 1.05% (NY close of 146.35) and downward momentum is building, albeit tentatively. In the coming days, USD could edge lower, but at this stage, the odds of a sustained decline below 144.00 are not high. On the upside, a break of the ‘strong resistance’ level at 148.80 would indicate the build-up in momentum has fizzled out.”

Technical levels to watch