USD/JPY jumps back above 148.00 boosted by bright US data

• The dollar pares losses and returns above 148.00.
• A set of positive US data refutes the theory of Fed easing.
• USD/JPY: Consolidating between 145.50 and 146.90 – UOB.

The greenback surged from session lows at 147.00 to pare losses from the Asian and European sessions and return to levels above 148.00. The release of a set of better-than-expected US macroeconomic indicators has boosted a hitherto weak US dollar.

US data refutes the theory of Fed easing

Macroeconomic figures from the US rattled FX markets on Tuesday, improving the sentiment about the US economic momentum and undermining the idea that the Federal Reserve might be forced to consider slowing down its monetary tightening path in December. This new scenario has sent the dollar and US treasury bond yields surging.

US manufacturing activity has beaten expectations in October, easing concerns about the possibility of a certain economic softening triggered by previous disappointing figures. The US ISM Manufacturing PMI has posted a 50.2 reading, against the 50 expected by the market, while the S&P PMI confirmed the upbeat news with the October reading improving to 50.4 and returning to figures consistent with expansion, against market expectations of a flat performance at 49.9.  

Furthermore, the JOLTS job openings have registered an increment to 10.7 million vacancies in September, up from 12.2 million in August, and against market expectations of a decline to 10 M. These figures show the tight conditions of theUS labor market, despite the Fed’s efforts to cool it off in order to curb inflation.

The US Federal Reserve’s monetary policy meeting, due on Wednesday remains the main attraction this week. The Fed is widely expected to hike rates by 75 basis points, but the market was increasingly confident that the bank would signal a softer hike in December, a theory that has come into question after today’s releases.

USD/JPY remains consolidating between 145.50 and 149.60 – UOB

From a wider perspective, FX analysts at UOB see the pair in a consolidative range between 145.50 and 149.60: “USD (…) dipped to 145.10 before rebounding strongly and the build-up in downward momentum faded quickly. USD appears to have moved into a consolidation phase and is likely to trade between 145.50 and 149.60 for the time being.”

Te3chnical levels to watch