US Dollar Prospects as Jobs numbers overstate potential, the path seems to be lower after the release of the US NFP report
US dollar modestly higher after NFP as Good Friday muted the trend
Following the publication of the March US NFP data in a session marked by decreased liquidity. Due to the Good Friday holiday, the U.S. dollar nudged slightly higher heading into the long weekend.
For reference, firms in the US added 236,000 jobs last month, which was just under the predicted rise of 239,000 jobs. In the meantime, average hourly earnings decreased more than expected. Falling to the lowest level since May 2021, from 4.6% y-o-y in Feb to 4.2% y-o-y today.
NFP REPORT FOR MARCH AT A SNEAK PEEK
US dollar looks steady as US NFP is low, but still robust by the historical pattern
The current employment survey may not have completely captured the effects of SVN and Signature Bank of New York’s failure. Considering the circumstances of when the BLS gathered information, even if job growth remained strong to historical norms. As a result of just tracking patterns from earlier in the month, when the crisis in the financial sector had not yet materialized. Hiring may be inflating resilience.
Why the USD may take a downward trend?
The Fed may decide without hiking borrowing prices at its May meeting, thus putting its tightening campaign on hold. In order to lean on the side of caution and buy more time to evaluate the economic picture in the aftermath of the recent financial crisis. In the event that traders discount interest rate reductions for the latter part of the year with more certainty. This situation may serve to support the U.S. dollar’s negative trend.
Technical Analysis and Perspective of USD
Technically speaking, the DXY index, which represents the value of the U.S. dollar, shows that it is still trading over crucial support near the 102.00 level. Or the 50% Fib retracement of the Jan 2021/Sept 2022 gain. Traders may assault the Feb lows at 100.82. If values successfully break this support level in the upcoming days. The attention goes to 99.00, the 61.8% Fib retracement of the prior run outlined above, on additional deterioration.
On the other hand, first resistance looms at 103.40, only a hair below the 50-day simple moving average, if the DXY index shocks and starts to recover significantly. We cannot, yet, discount out a rally into trendline resistance around 104.50. If the ceiling is broken. But considering the skepticism of the U.S. dollar at the moment, the positive scenario looks improbable.
Summary
In March, the U.S. economy created 236,000 new jobs, slightly fewer than forecasts. Average hourly wages, in the meantime, decreased more than anticipated, falling to 4.2 percent year over year.
The effects of the failure of SVB and SBNY, however, might not be fully captured in the labor market report. Given Friday’s market response, the U.S. dollar is bound to move down since this is the direction of least resistance.
