Forexlive Americas FX news wrap 2 Oct: JPY moves sharply lower as rate hikes off table

The JPY moved sharply lower in trading today and is ending the day as the runaway weakest of the major currencies. The AUD, USD and CAD are the strongest.

The move lower in the JPY was largely driven earlier in the day by Japan's Prime Minister Ishida's comments that rate hikes are off the table. That shifted his recent bias (at least for now) for higher rates.

The move was further fueled by Bank of Japan (BoJ) Governor Ueda's comments that markets "remain unstable", implying that rate hikes aren't likely anytime soon. Ueda had previously stated that the BoJ wouldn't hike rates until markets stabilize, and Japan's economy is recovering moderately, albeit with some weak signs.

Later in the US session, stronger ADP jobs data which showed September employment rising 143K vs 120K estimate. There was a revision to the prior month. The ADP has tended to be lower than the US NFP of late. That report will be released on Friday at 8:30 AM with the estimate of 144K (traders might be looking for something stronger now).

Additionally, Richmond Fed President Thomas Barkin stated that the recent 50 basis point rate cut was justified due to rates being out of sync with the declining inflation and an unemployment rate nearing sustainable levels. However, he emphasized that the Fed cannot yet declare victory over inflation. He expects little additional reduction in core PCE until next year and is closely monitoring how lower rates affect sectors like housing and auto sales to assess whether demand risks outpace supply. While the labor market remains steady with low hiring and firing, demand for workers may rise if economic demand increases. Barkin also pointed to inflation risks stemming from recent labor actions and geopolitical conflicts. He noted that the pace and extent of future rate cuts depend on how inflation and the broader economy evolve. Overall, although the Fed may look to "recalibrate" rates, the comments are not suggesting a race to lower levels.

Technically,, the USDJPY raced above 50% midpoint levels on the hourly chart (from mid-AUgustg high) at 144.48 and 50% midpoint level off the daily chart (range since January 2023) at 144.58. The price of the USDJPY is up testing the high price from last week (Firday) at 146.47 before it fell sharply down to 141.69 on Monday (the very next day). In the new trading day getting above the 146.47 level would open the door for further momentum toward a double top from September 2 and September 3 at 147.189.

Looking at the GBPJPY, it moved above the converged 100 and 200-hour moving averages near 191.96 earlier in the day, and then above its 200-day moving average of 192.82, and then a swing area between 193.33 and 193.48.

Unlike the USDJPY, it is still well short of the high price from last Friday near 195.895. That level also happens to correspond with the 100-day moving average (blue line at the top of the chart below).