- US Dollar Index gains traction on upbeat ADP data.
- FOMC is expected to keep the policy rate unchanged later today.
- Wall Street opens decisively higher on Wednesday.
After moving sideways in a tight consolidation channel above the 109 handle during the first half of the day, the USD/JPY rose sharply in the last hour boosted by improved market sentiment and the strong USD-buying wave. As of writing, the pair was up 0.31% on a daily basis at 109.72.
The monthly report published by the ADP today showed that the employment in the private sector increased by 213,000 jobs from December to January to surpass the analysts’ estimate of 175,000 by a wide margin. With the initial market reaction to the data, the greenback gathered strength against its rivals and the US Dollar Index came within a touching distance of the 96 mark. At the moment, the index is up 0.15% on the day at 95.95.
Additionally, major equity indexes in the U.S. started the day in the positive territory to reflect a high appetite for risk-sensitive assets and weighed on the traditional safe-havens such as the JPY. Both the Dow Jones Industrial Average and the Nasdaq Composite gain more than 1% in the early trade.
Later in the day, the FOMC will be publishing its monetary policy statement and Chairman Powell will deliver his remarks on the policy outlook at a press conference. “We expect the Fed’s ‘data dependence’ to come down to momentum in business investment on the one hand and employment on the other. We believe financial conditions and global growth concerns will continue to play a role via their impact on investment and employment,” Standard Chartered analysts argued in a recently published article.
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Key technical levels to watch for
The pair could face the first resistance at 110 (psychological level) ahead of 110.40 (50-DMA) and 110.90 (Dec. 28, 2018, high). On the downside, supports could be seen at 109.20/15 (daily low/20-DMA), 108.40 (Jan. 16 low) and 108 (psychological level/Jan. 14 low).
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