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Dollar Gains Traction Following Fed Meeting
The dollar gain traction in the wake of the Federal Reserve’s monetary policy meeting, as traders began to price in hawkish undertones. The Fed did a good job of not showing its hand, but expectations are that the Fed will make a move in either September or December. While the labor markets continue to improve, inflation expectations remain subdued.
USD/JPY edged out a fresh nine-day peak at 124.33. The better than expected June IP came in at 0.8% month over month helping the Nikkei 225 close higher by almost 1%. Interest rate differentials continue to move in favor of the greenback as the BOJ and the Fed reflect diverging monetary policy paths.
The currency pair pushed above trend line resistance that connects the highs in May to the highs in July and comes in at 124.15. The next level of target resistance on the currency pair is seen near 125.63. Support is seen near the 10-day moving average at 123.90. Momentum has turned positive with the MACD (moving average convergence divergence) index generating a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.
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