Dollar Breaks Above Seven-Week High After Strong Rate Hike Response
The US Dollar (USD) experienced a strong breakout after the Federal Reserve (Fed) and Bank of Japan (BoJ) rate hike announcements, making up for its sell-off in the prior week.
USD/JPY remained the driving force behind global FX markets, with the response to the BoJ rate hike being particularly notable. The pair's pullback was stronger than expected, with USD/JPY putting in a strong showing around the FOMC and BoJ rate hike announcements.
The Dollar Index (DXY) pushed above the 100-level for the first time since July, reaching a fresh seven-week high. This move has been driven by the Fed's forecast of another rate hike by year-end and the BoJ's decision not to catch markets off guard with explicit timelines for future hikes.
The crowded carry trade has yet to unwind, leaving some uncertainty around USD/JPY's near-term direction. However, from a longer-term perspective, a five-year trendline continues to set support, making it a notable level until it is taken out.