Title: US Dollar Gains Momentum Against Yen and Canadian Dollar While Australian Dollar Holds Firm
Original Article by: Axel Rudolph, Market Analyst at IG
Link: [IG Forex News & Trade Ideas](https://www.ig.com/za/news-and-trade-ideas/_dollar-strengthens-against-yen-and-canadian-dollar–while-aussi-230913)
Date Published: September 13, 2023
The US dollar continued its strong rally in foreign exchange markets, registering significant gains particularly against the Japanese yen and Canadian dollar following an uptick in US economic data and sustained high yields in the bond market. While the greenback surged against these major currencies, the Australian dollar displayed notable resilience, buoyed by domestic data and external factors.
This article provides a comprehensive review of the key movements in forex markets, focusing on how recent economic indicators, central bank commentary, and broader global financial trends influenced major currency pairs. A closer look is also given to relevant technical chart formations that gave forex traders additional strategic insights.
US Dollar Strengthens Across the Forex Board
The US dollar extended its winning streak primarily backed by expectations that the Federal Reserve may maintain higher interest rates for longer than previously expected. Despite mixed inflation data, sentiment remained bullish on the dollar due to positive labor market trends and robust growth indicators.
Key Drivers Behind Dollar Strength:
– A combination of sticky inflation and tight labor conditions that support a hawkish Fed outlook
– US Treasury yields staying elevated, making USD-denominated assets more attractive
– Safe-haven demand for the US dollar amid ongoing geopolitical risks and global economic uncertainty
USD/JPY Rallies Above 147.50
One of the standout performers amid dollar strength was the USD/JPY currency pair, which climbed well above the 147.50 resistance level. Investors positioned themselves for potential policy divergence between the US and Japan, particularly as the Bank of Japan (BoJ) sticks to ultra-loose monetary policy.
Key Takeaways for USD/JPY:
– The yen weakened sharply as Japanese officials remained cautious about tightening monetary policy
– Intervention speculation remained high as the pair approached psychologically sensitive levels near the 148.00 mark
– The pair is trading significantly above its 200-day simple moving average, indicating a sustained uptrend
Technical Outlook:
– A decisive breakout above 147.50 confirms bullish momentum
– Immediate resistance can be seen near the 148.50 and 149.00 zones
– Support is located near 146.50 and the 145.00 levels in case of a pullback
Tensions surrounding intervention by Japanese authorities have risen again as the yen’s depreciation rekindles fears of imported inflation. Officials have not ruled out coordinated currency defense measures but remain vague on timing, adding further volatility to trading conditions.
USD/CAD Pushes Toward Multi-Month Highs
Renewed strength in the USD also pushed the USD/CAD pair closer to highs not seen since early summer, driven largely by disappointing Canadian economic indicators and a downturn in crude oil prices—a major export commodity for Canada.
Key Developments for USD/CAD:
– Canadian employment data fell short of expectations, weakening support for the loonie
– Oil prices saw a retreat after initial gains, undermining CAD’s commodity-linked advantage
– The Bank of Canada’s relatively dovish tone contrasts sharply with lingering Fed hawkishness
Technical Chart Assessment:
– The pair cleared the 1.3650 level, paving the way for moves toward 1.3700 and beyond
– RSI momentum suggests overbought conditions, but no clear reversal patterns have formed
– Strong support lies around 1.3550 and further down near 1.3475
Although crude oil markets had briefly rallied on supply concerns and OPEC+ constraints, recent macroeconomic fears around global growth cooled demand expectations. This, in turn, put Canadian oil exports under pressure, reducing foreign demand for the loonie.
Australian Dollar Maintains Stability Against Greenback
In contrast
Explore this further here: USD/JPY trading.