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💹 Dollar Weakness Pauses, Market Searching for Direction

💹 Dollar Weakness Pauses, Market Searching for Direction

📌 Recap: End of Last Week & Tokyo Session

  • Powell’s Jackson Hole speech revived rate-cut expectations, driving dollar weakness late last week.

  • Tokyo opening: USD/JPY briefly climbed to 147.53, but fell back to the low-147s in a corrective move.

  • U.S. equities supported risk-on yen selling, but follow-through was limited.

  • With UK markets closed for Summer Bank Holiday, liquidity remained thin and direction uncertain.

📊 Timeline of Rate-Cut Expectations Since July

  • Aug 1 – U.S. NFP: Weak → rate-cut expectations rise

  • Aug 12 – CPI: Below forecast → expectations accelerate

  • Aug 14 – PPI: Strong → rate-cut expectations temporarily ease

  • Aug 21 – PMI: Improvement → mild pullback in cut bets

  • Aug 23 – Powell: Dovish tilt reinforced cut outlook

📌 Markets now see a 25bp cut at September FOMC as base case, with two cuts priced in by year-end.

💱 FX Moves

  • USD/JPY: Stable around low-147s

  • EUR/USD: Briefly dipped below 1.1700 but quickly recovered → firm tone

  • GBP/USD: Limited downside below 1.3500 → solid support

  • EUR/JPY: Trading steady around 172

  • GBP/JPY: Consolidating near 199 → potential test of 200

🌍 Europe: German Ifo Sentiment

  • Slightly above expectations in August, but market impact muted.

  • EUR/USD & EUR/JPY little changed → reaction subdued.

📊 Range Table (Early Week Guidance)

Pair Current Level Support Resistance Comment
USD/JPY ~147.20 146.50 148.00 Dollar weakness paused, topside capped; tied to U.S. yields.
EUR/USD ~1.1680 1.1600 1.1740 Stable around 1.17; upside break needs data catalyst.
GBP/USD ~1.3470 1.3400 1.3550 Battling 1.35 handle; weak UK data weighs.
EUR/JPY ~172.20 171.50 173.00 Range-bound; euro stable, yen selling provides support.
GBP/JPY ~199.10 197.50 200.50 Watching 200.00 test; break may be limited.

✅ Summary

  • USD/JPY: Stuck in low 147s; vulnerable to swings with U.S. yield shifts.

  • EUR/USD: Firm but 1.1740 resistance remains tough; likely data-driven moves.

  • GBP/JPY: Eyeing 200 test; UK data could decide direction.

  • Cross-yen: Balance between structural yen selling and pre-event consolidation.

👉 Clearer directional moves likely after the U.S. PCE deflator later this week.

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