USD/JPY plunges as Powell signals Fed rate cuts, dollar index drops 0.57%

The dollar index tumbled 0.57% following dovish comments from Fed Chair Powell, who acknowledged rising employment risks and potential monetary policy adjustments. USD/JPY fell sharply from 1.5-week highs, dropping approximately 120 pips to 145.80 as Treasury yields declined across the curve. Powell's Jackson Hole remarks marked a significant shift in Fed rhetoric, explicitly stating that the balance of risks may warrant rate cuts sooner than previously anticipated. Gold surged $25 to $2,520/oz, reflecting reduced dollar strength and lower real yields. Market participants are now pricing in a 65% probability of a 25bp rate cut at the September FOMC meeting, up from 40% before Powell's speech. Technical indicators show USD/JPY breaking below the 146.50 support level, with next major support at 145.00. The dovish pivot suggests continued dollar weakness ahead, particularly against safe-haven currencies.