After suffering severe losses late Friday. The US Dollar (USD) retains its ground versus its key competitors at the start of the week. The US Dollar Index. Which measures the performance of the USD against a basket of six major currencies, is hovering around 102.50.
The USD was under heavy selling pressure ahead of the weekend after the US Bureau of Labor Statistics’ monthly jobs data suggested hints of a slowdown. Nonfarm payrolls (NFP) increased by 209,000 in June, which was less than the market expected gain. of 225,000. Furthermore, the May rise of 339,000 was reduced to 306,000. Other published data indicated that the unemployment rate fell to 3.6%, while annual wage inflation remained stable at 4.4%.
The US economic calendar will be devoid of high-level data releases on Monday, and the USD’s value may be impacted by statements from Federal Reserve (Fed) officials, notably San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester. Later this week, June inflation data might spark the next major move in the USD.
The US dollar stabilizes on Monday
“The combination of weak job growth and rising wages shifts attention to next week’s Consumer Price Index (CPI) report.”
On Friday, Chicago Federal Reserve Bank President Austan Goolsbee told CNBC that the labor market was still robust but softening.
US Treasury Secretary Janet Yellen stated over the weekend that she had a “direct” and “productive” talk with senior Chinese officials. “The US and China have significant disagreements,” .
The 10-year US Treasury bond yield falls somewhat but remains comfortably over 4%. US stock index futures are in the red, indicating a dismal start on Wall Street on Monday.
Despite the mixed employment data, markets continue to price in a more-than-90% possibility of the Fed rising interest rates. In July, the policy rate was raised by 25 basis points. The likelihood of the Fed raising interest rates again after July is roughly 30%.
“the Dollar provides one of the highest yields of the world’s major currencies, thanks to the Fed’s hiking cycle,” according to newly published research. “In a world of weak global growth, this yield will almost certainly aid the Dollar’s appreciation.”
The US CPI is expected to grow 3.1% year on year in June, following a 4% increase in May.
Technical Outlook
On Friday, the US Dollar Index (DXY) closed below the 100-day Simple Moving Average (SMA), while the 20-day SMA crossed below the 50-day SMA. Furthermore, the Relative Strength Index (RSI) fell below 50 after moving sideways at that level in recent weeks.
On the downside, key support is aligned around 102.00 (psychological level, static level). A daily closure below that level may entice sellers and pave the way for a prolonged decline toward 101.50 (static level) and 101.00 (static level, psychological threshold).
At 103.00 (100-day SMA, 50-day SMA, Fibonacci 38.2% retracement of the May-June upswing), strong resistance appears to have emerged. If the DXY climbs above that level and begins to use it as support, the next targets might be 103.50 (Fibonacci 23.6% retracement) and 104.00 (psychological level).
