USD/JPY: Dollar Struggles to Regain ¥148 as Traders Ramp Up Bets on Interest-Rate Cuts

Greenback is looking to log the fifth red day of the last six sessions. No jobs data on deck for Friday might help dollar bears go where they want to go.

🤔 Dollar Struggles to Gain Momentum

• The USDJPY pair was floating under the flatline Friday as currency traders were figuring out what to do about the economic blackout. The US government is in shutdown mode and that means it won’t be releasing the monthly jobs data today.
• The uncertainty around the state of the US economy is weighing on the greenback, at least in the short term. The dollar-yen pair logged a winning Thursday but if Friday clocks out in the red, it will be the fifth losing day of the past six sessions.
• The USDJPY pair was trading near ¥147.30 this morning, sandwiched between the three major simple moving averages (SMAs). The 200-day line is sitting at ¥148.20 – a key resistance level that many are watching right now.

✨ Lights-Out Moment

• So how’s the lack of reports going to affect the dollar? Traders aren’t exactly sure what to make of it, but one thing that’s been noticed is the broad dollar weakness. And that’s largely due to the perception that interest rates are supposed to move lower.
• The Federal Reserve is meeting at the end of the month and traders are already pricing in a 98% chance of a rate cut. Even more so amid the ongoing lights-out moment for the US government.
• With no jobs data and no guidance about the length of the shutdown, Fed officials will be working with what they have. Private-sector growth showed a net job loss of 22,000 in September. Troubling enough for a cut?

👀 What to Watch Next Week

• Naturally, forex markets have decided to drift away from the greenback and into safer alternatives. The Japanese yen is an easy one. Despite its own domestic challenges, the yen is considered a safe haven in gloomy times.
• But still, Japan is struggling to reel its economy out of an yearslong inflation spiral where prices have stayed stubbornly high above the Bank of Japan’s 2% target.
• With the jobs data not coming today, let’s take a look at what can move the volatile pair next week. The Fed’s meeting minutes drop Wednesday and Fed boss Jay Powell speaks on Thursday. September’s jobs data is coming Friday (if the government comes back online).