In the U.S., today is a holiday (Columbus Day or Indigenous People’s Day) so the markets were quiet since the banks and the bond market were closed and no economic reports were released. ?
Last Friday, the U.S. jobs report showed the labor market continues to remain strong showing an unexpected dip from 3.7% to 3.5% in the unemployment rate.
This put an end to any hopes that the Federal Reserve might adopt a more dovish stance towards its monetary policy and caused the U.S. dollar to further strengthen.
Until the Fed “pivots” from its aggressive interest rate hikes and admits they’re “done raising interest rates,” it’s going to be very hard for other currencies to sustainably rally against the U.S. dollar.
(Geopolitical uncertainty caused by Russia’s attacks across Ukraine also provides demand for the U.S. dollar as a safe-haven currency.)
Trying to predict exactly when the Fed will pivot is tough. From the recent U.S. jobs data, it doesn’t look like it’ll happen very soon.
In an interview today, this view was reinforced by Chicago Fed President Charles Evans who said that the Fed members are closely aligned on the need to continue raising rates until it reaches roughly 4.5% by early next year. He also mentioned that the central bank is committed to bringing down inflation even if it means people losing their jobs.?
Inflation will be in focus this week and Thursday’s U.S. CPI report will be the most important economic report to watch. ?
The U.S. dollar continues to be the main driver of the major currencies so it’ll be interesting to see how the U.S. dollar index (DXY) moves during the week.
So far, it has maintained its bullish momentum from Friday and edged higher today.
Looking at DXY’s price action, since near the start of the year, the price has been above both its 50 (pink) and 200 (blue) SMA. And since April, it’s been making a series of higher lows and higher highs.
These are clear signs that the U.S. dollar is in a strong uptrend.
Will the U.S. dollar surge and create a higher high? Resistance levels are 114.50 – 114.80.
Or has it peaked and will it now try to put in a lower low? A significant support level is 110.00.
Let’s review what else happened in the FX market today…
Currency Market Movers
Which currency pairs gained the most today?
As shown by our FX Market Movers page, GBP/AUD was the leader of the pack, gaining 0.79% or 137 pips! ?
Which currency pairs lost the most today?
AUD/USD was the biggest loser, falling 1.03% or 65 pips! ?
Currency Strength
What was the overall strength or weakness of individual major currencies today?
Based on the Currency Strength Meter on MarketMilk™, USD was the strongest currency, while AUD was the weakest currency. ?
As mentioned earlier, the gains made by the U.S. dollar were supported by expectations for further interest rate hikes by the Fed after Friday’s strong jobs report.
Currency Short-Term Trends
When it comes to short-term trend strength, the U.S dollar (USD) continues to show the most bullish strength, along with the Japanese yen (JPY)
The Aussie dollar (AUD) and New dollar dollar (NZD) show the most bearish strength.
Currency Volatility
Which currency was the most volatile today?
Based on our Currency Volatility Meter, it’s the Australian dollar (AUD). Although the New Zealand dollar was volatile as well.
Which currency pair was the most volatile today?
Given that AUD was the most volatile currency, it has to be an AUD pair. But which one?
AUD/USD. It moved over 1.68% or 105 pips.
