Dollar slides as markets price near-certain December Fed cut; USD/JPY breaks lower toward 153.50 as yen firms
The dollar weakened broadly after traders dialed up bets on a December Federal Reserve rate cut, while USD/JPY slipped through trend support with the yen buoyed by cautious hawkish signals from the Bank of Japan. Attention now turns to U.S. ISM, ADP, and jobless claims for confirmation of slowing momentum into the FOMC.
Dollar softens as Fed cut odds swell
The greenback extended losses after New York Fed President John Williams signaled support for a December rate reduction, reinforcing a dovish pivot already underway in rates markets. A softer-than-expected ADP print last week and a Bloomberg report suggesting Kevin Hassett has moved to the front of the pack for the Fed Chair role added to the dollar’s drag.
Swaps now imply roughly a 92% probability of a December cut, effectively making the meeting a foregone conclusion for many traders. With the data calendar thinned ahead of the FOMC, near-term FX price action is likely to hinge on jobless claims, ISM, and ADP updates—none of which have shown decisive improvement in recent weeks. Sustained weakness would keep pressure on the dollar; any surprise strength may provide a short-term reprieve. Ultimately, the market’s focus is the policy message next week and how subsequent NFP and CPI prints shape the 2025 rate path.
BoJ watch: wage signals keep hike risk alive
The yen found support after Governor Kazuo Ueda indicated a rate hike remains up for debate, even if the timing is uncertain. The BoJ remains laser-focused on wage negotiations and incoming data ahead of its next meeting. Markets are pricing about a 36% chance of a December hike, keeping JPY shorts wary and dampening USD/JPY upside into key resistance.
Risk appetite is steady but fragile in FX, with lower U.S. Treasury yields and higher rate-cut odds supporting high-beta pairs while defensive flows favor the yen on dips. Volatility in USD/JPY has picked up as traders weigh the narrowing U.S.-Japan rate differential against carry demand.
Key points
- Markets price roughly 92% odds of a December Fed rate cut as the dollar retreats.
- Softer ADP and a media report on Fed Chair succession added to USD headwinds.
- BoJ keeps a potential hike on the table amid wage data focus; markets see about a 36% chance in December.
- USD/JPY breaks a daily uptrend line, exposing 153.50; resistance near 155.66 caps rebounds.
- Near-term catalysts: ISM Manufacturing and Services, ADP, weekly jobless claims, and University of Michigan sentiment.
USD/JPY technical picture
Daily: Trendline break puts 153.50 in view
USD/JPY has slipped below its daily uptrend line, opening a path toward the 153.50 support zone. Sellers accelerated on the break and are likely to defend rallies until that area is tested. Dip buyers may prefer to wait for 153.50 to attempt a higher-probability bounce back toward the highs.
4-hour: Sellers lean on a descending trendline
On the 4-hour chart, a minor descending trendline is guiding the pullback. Bears are likely to fade bounces into this line with risk defined above, targeting the 153.50 support. Bulls need a clean break above the trendline to shift momentum and refocus the 160.00 handle.
1-hour: 155.66 caps intraday recoveries
Intraday, USD/JPY has struggled to clear resistance around 155.66, an area that has repelled several attempts in recent sessions. A push into this zone may attract fresh sellers aiming for another leg lower. A decisive break above 155.66 would likely extend the pullback toward the 4-hour descending trendline, with intraday range metrics suggesting room on both sides amid elevated volatility.
Calendar: Data that could move FX
– Today: U.S. ISM Manufacturing PMI
– Wednesday: U.S. ADP Employment, ISM Services PMI
– Thursday: U.S. Initial Jobless Claims
– Friday: University of Michigan Consumer Sentiment
The sequence will help shape expectations heading into the FOMC. Softer prints would reinforce the dollar’s downtrend, while upside surprises could trigger a squeeze amid stretched rate-cut pricing. For traders, liquidity around releases may be patchy, amplifying moves.
FAQ
Why is the dollar falling ahead of the FOMC?
Markets are pricing a near-certain December rate cut following dovish Fed commentary and softer U.S. data. Lower expected policy rates reduce the dollar’s yield advantage, pressuring the greenback against peers.
What is supporting the yen right now?
Hints from BoJ Governor Ueda that a rate hike remains possible, combined with a market focus on wage gains, have lifted the yen. Rising odds of a policy shift—even if modest—reduce the USD/JPY carry appeal at the margin.
What levels matter for USD/JPY?
On the downside, 153.50 is the key daily support. Intraday resistance sits around 155.66, with a broader upside target near 160.00 if momentum turns higher. A sustained break below 153.50 would likely invite more selling pressure.
Which upcoming data points are most important?
ISM Manufacturing and Services, ADP employment, and weekly jobless claims will guide near-term positioning before the FOMC. Post-meeting, NFP and CPI will be critical for mapping the trajectory of cuts into 2025, according to BPayNews.
Could a strong data surprise reverse USD losses?
Yes, a string of upside surprises could push back against aggressive rate-cut pricing and lift Treasury yields, driving a short-term bounce in the dollar. That said, the Fed’s policy message next week will be the decisive catalyst for trend direction.
