Dollar dynamics: Fed Watch, job data, and EUR/USD & USD/JPY insights

The US dollar exchange rates against major currencies have been a hot topic of discussion over the past few months. The value of the US dollar was significantly impacted by concerns that tariffs would lead to higher inflation, as well as the Federal Reserve's reluctance to lower interest rates due to fears of inflation driven by tariffs.

The US dollar index has been trading sideways since late 2022 until late 2024, after which the dollar began to appreciate, reaching highs of 110.00. However, following the US elections and the inauguration week, the trend reversed, and the dollar index dropped to the 98.00 range.

On Tuesday morning of this week, the JOLTS Jobs report indicated an unexpected rise in April job openings to 7.39 million, primarily driven by private sector industries such as professional and business services and healthcare. However, there was a decline in job openings in the manufacturing and Leisure and Hospitality sectors.

On Friday, June 6th, markets will focus on the US nonfarm employment change, average hourly earnings, and the unemployment rate. While the US labor market has generally been strong, there have been recent signs of minor weakness in sectors like Leisure and Hospitality (April 2025) and Manufacturing (February, March, and April 2025).

April's Non-Farm Payroll (NFP) figures were at 177,000, within its recent averages; however, Bloomberg's analyst surveys forecast May's NFP to be around 130,000, with some estimates as low as 96,000. The unemployment rate is expected to remain at 4.2%, and the average hourly earnings are projected to increase month-over-month by 0.3% (from 0.2%) and year-over-year by 3.7% (from 3.8%).

On Wednesday, June 18, 2025, all eyes will be on the Federal Funds rate decision, the FOMC statement, the Summary of Economic Projections (SEP), and the Press Conference. This SEP report includes the FOMC’s projection for inflation and economic growth over the next 2 years. This meeting will also feature the Fed’s dot plot, which is due for release, including the breakdown of individual FOMC members’ rate forecasts.

Over the past few days, Federal Reserve officials continued to comment on interest rates and inflation.

Speaking to reporters, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said he's in no rush to move interest rates, adding that he wants to see a lot more progress on inflation despite recent encouraging price data1.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said in a webcast interview with the Quad Cities Regional Business Journal2 that the recent PCE inflation print may be the last data point before the impacts of the tariffs are felt.

Federal Reserve Bank of Dallas President Lori Logan said, “We are seeing risks on both sides of our dual mandate that appear fairly balanced.”3

Federal Reserve Bank of Minneapolis President Neel Kashkari said “The economy is seeming like it’s pretty resilient so far, and so for me right now is the time to get data, see how the tariff negotiations shake out before we reach any firm conclusions about the direction of interest rates,"Kashkari said Wednesday in an interview on CNN.

According to the most recent review of the CME Fed Watch tool, 95.6% of market participants expect interest rates to remain unchanged for the June 18th, 2025, FOMC meeting.

• EUR/USD price action has been trading within an ascending channel since early March 2025, as indicated by green lines on the chart.
• Following a consolidation and flag formation (blue lines), price action broke below the lower border (green line) of the ascending channel in early May 2025.
• Price action found support along the flag's lower border and resumed its rally back up to 1.1441, but has not re-entered the ascending channel so far.
• Multiple technical indicators converge to create a resistance confluence between 1.1441 and 1.1489, including the monthly R1 at 1.1489, the weekly R1 at 1.1441, and the lower border of the ascending channel.
• A support confluence exists below the price action, represented by the monthly pivot point of 1.1277, the weekly pivot point of 1.1325, and the intersection of SMA9 and EMA9.
• The Stochastic indicator aligns with the price action, currently at overbought levels, with its %K line crossing below the %D line.
• The RSI is in line with the price action and remains near its neutral level.

• The USD/JPY price action has been trading within a descending channel since early 2025, as indicated by the red lines.
• Following an inverted Head and Shoulders pattern (H, S, S), price action broke above the pattern's neckline in early May 2025.
• A throwback attempt occurred in late May, finding support along the neckline extension.
• A bullish engulfing candle (BE1) appeared on May 27th. A second bullish engulfing candle (BE2) appeared on June 3rd, which was covered by a bearish candle on the following day, reflecting indecision.
• A confluence of resistance exists at the intersection of EMA9, SMA9, and the weekly pivot point of 144.15. A second confluence of resistance exists at the intersection of SMA 21 and the monthly pivot point of 144.94.

• The USD/JPY weekly chart shows price action trading between two main trendlines: trendline 1 (blue) and trendline 2 (black).
• Following a double top in late 2024 and resistance at the trendline (blue), the price decreased from 158.00 to 140.00, breaking below multiple support levels, including trendline 2 (black).
• A potential exhaustion gap occurred at the breakout level, marked by a light blue circle.
• A potential double bottom formation is developing, marked by blue curve lines, with a baseline near 146.80 (dotted blue line).
• Price is currently facing a resistance confluence where EMA9 and SMA9 intersect with the monthly pivot point of 144.94. A second resistance confluence exists where SMA 21 crosses trendline 2.
• The RSI is near oversold levels. The Stochastic indicator is also near oversold levels and shows a potential positive divergence with the price.

The commitment of traders report (COT - Traders in Financial Futures - TIFF) for the week ending on Friday, May 30th, 2025 (includes data up to the end of day Tuesday, May 27th, 2025) reflects the following:

• The dealer/intermediary positioning level is currently at an extreme, multi-year high and approaching its 10-year high, suggesting a potential shift in sentiment for the USD Index. (DXY)
• Potential positive divergence between the latest phase of the declining price and the rising futures market open interest. A similar pattern can also be seen in volume data.

Footnotes:

1https://www.bloomberg.com/news/articles/2025-06-03/fed-s-bostic-wants-more-progress-on-inflation-in-no-rush-to-cut

2https://www.reuters.com/business/fed-likely-track-lower-rates-after-bumpy-period-says-goolsbee-2025-06-02/

3https://finance.yahoo.com/news/fed-patient-ready-respond-needed-155100247.html

4https://www.bloomberg.com/news/articles/2025-06-04/kashkari-says-fed-well-positioned-to-wait-for-tariff-impact