The US Dollar (USD) remains stable. The US Dollar Index (DXY), which measures the value of the US dollar against a basket of six major currencies. Remains bullish over 104.00, having gained more than 0.5% in response to the good. May employment report released by the US on Friday.
The USD’s valuation might be influenced by the ISM’s Services PMI data for May in the second half of the day. Markets anticipate that the report will show continued growth in the service sector’s business activity. While Another month of high input inflation is expected. It’s also worth mentioning that the US Census Bureau will publish April Factory Orders statistics.
Market movers for the day: The US dollar rises on Monday.
The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls increased by 339,000 in May. This figure far above the market’s forecast of 190,000 by a wide margin. The April reading of 253,000 was also raised higher to 294,000.
The underlying data of the labor market report indicated that the unemployment rate increased to 3.7% from 3.4% during the same time last year. The labor force participation rate stayed constant at 62.6%, but annual wage inflation, as measured by the change in Average Hourly Earnings, fell to 4.3%. from 4.4%.
“Is the US economy experiencing a soft landing?” he asked in response to the US jobs statistics. According to the most recent Nonfarm Payrolls, the employment market has reached a “Goldilocks level” – neither too hot nor too cold, “It means continued growth for markets, but with lower inflation and interest rates.” The path of least resistance for the US Dollar is down.”
The May ISM Services PMI data might have an impact on the US Dollar’s performance on Monday.
Following the release of the US employment data, the benchmark 10-year US Treasury bond yield broke a five-day losing trend and climbed about 3% on Friday. On Monday, the 10-year yield continued to rise and remained in positive territory over 3.7%, supporting the USD.
Despite increasing US rates, the CME Group Fed Watch Tool indicates that markets are stable. are still pricing in a more than 70% chance that the Federal Reserve (Fed) will maintain its policy rate at its forthcoming meeting.
“There’s likely enough softness in this report for the FOMC to hold off on raising rates at the next meeting, though another strong payroll gain in June, combined with another disappointing inflation report, could set the stage for a rate increase in July,” Bank of Montreal economists said of the labor data’s potential impact on the Fed’s policy outlook.
In the European session, US stock index futures trade neutral. The S&P 500 Index rose more than 1% on Friday as markets reacted positively to robust employment data.
Technical Outlook
The US Dollar Index anticipates further rises in the near future. On Thursday, the US Dollar Index (DXY) broke above 104.00, the Fibonacci 23.6% retracement of the November-February downturn. The Relative Strength Index (RSI) indicator on the daily chart surged over 60, confirming the bullish bias in the near-term technical picture.
DXY’s initial resistance level is 104.50 (static level), followed by 105.00 (psychological level). A daily close above the latter may attract more buyers and pave the way for a longer-term rebound towards 105.60 (Fibonacci 38.2% retracement, 200-day Simple Moving Average (SMA)).
On the downside, if DXY falls below 104.00 again, negative pressure may escalate. In such case, 103.50 (static level) might be considered first support prior to 103.00 (100-day SMA).
