Forex Today: Dollar slides further ahead of NFP

It's NFP day. During the Asian session, Japan will release Labor Cash Earnings and the Leading Economic Index. The Reserve Bank of Australia will publish the Financial Stability Review. Later in the day, Germany will release Factory Orders and Unemployment Rate. The US employment data will be the highlight event of the day.

Here is what you need to know on Friday, October 6:

The US Dollar dropped for the second consecutive day, but this move is still considered corrective, with no significant changes in fundamentals. Economic data from the US showed Initial Jobless Claims remaining near monthly lows, coming in below expectations and indicating that labor market conditions remain tight.

On Friday, the key event for determining the direction of the US Dollar will be the US employment report. Nonfarm Payrolls are expected to rise by 170,000, and the Unemployment Rate is projected to decrease from 3.8% to 3.7%. A positive report can potentially strengthen the Dollar's rally, while soft figures, in line with the ADP data, could trigger a correction and a rally in Treasury yields.

The US Dollar Index (DXY) declined for the second day, falling below 106.50 and retracing further from monthly highs. This drop was driven by a decline in US Treasury yields, with the 10-year Treasury yield falling to 4.71% and the 2-year yield retreating to 5.02%.

EUR/USD rose towards the 1.0550 area and shows some potential for more gains, but the primary trend remains bearish. Germany will release Factory Orders data for August on Friday.

USD/JPY approached 148.00 as it remains volatile with a downside bias, but US data could trigger sharp movements. Japan's data due on Friday includes Labor Cash Earnings and the Coincident Index.

USD/CHF continues to correct lower from monthly highs after failing to hold above 0.9200; it slid toward 0.9120. Switzerland will release Unemployment Rate and Foreign Reserves data.

AUD/USD rose for the second consecutive day, rising above 0.6350. The pair seems poised to recover during the Asian session but faces resistance at 0.6375. The Reserve Bank of Australia (RBA) will release the Financial Stability Review, which is not expected to bring surprises.

The Loonie lagged as crude oil prices declined for another day. USD/CAD pulled back after a four-day rally, falling towards 1.3700. Canada will release the Employment Report on Friday, with a positive net change in employment of 20,000 expected.

NZD/USD had its best day in a week, rising above the 20-day Simple Moving Average (SMA) and approaching the 0.5950 area. The short-term bias is to the upside, but risk sentiment and Dollar dynamics are likely to dominate.

Gold touched fresh monthly lows and then rebounded to around $1,820. The yellow metal benefited marginally from the slide in US Treasury yields. Silver finished slightly below $21.00 after being able to hold above the key support area at $20.65.

 

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