US Dollar stabilizes around 104.00 after US opening


  • The US Dollar has eroded the bottom of the weekly range, despite sticky PCE inflation and lower claims.
  • A moderately hawkish BoJ Governor Kazuo Ueda and higher inflationary pressures in the Euro Area have weighed on the USD.
  • DXY bounces from fresh lows, battles to reconquer the 104.00 threshold

The US Dollar Index (DXY) has failed to draw any significant support from the unexpected decline in US Jobless Claims and the sticky inflationary pressures highlighted by the Core Personal Consumption Expenditures (PCE) Prices Index.

From a wider perspective, the US Dollar (USD) remains relatively close to the three-month highs hit earlier this month and is on track to close its best monthly performance in more than two years. 

Investors remain looking from the sidelines awaiting Friday’s Nonfarm Payrolls (NFP) report, which will determine the pace of the Federal Reserve's easing cycle.

Daily digest market movers: The US Dollar trims gains ahead of October's NFP report 

  • The US PCE Prices Index grew at a steady 2.1% yearly pace in October, down from September's 2.2%. The Coree Inflation, more relevant for the Federal Reserve, has remained steady at 2.7% against the market consensus of a decline to 2.6%.
     
  • US Jobless Claims fell to 216K in the week of October 25 instead of increasing to 230K as the market consensus anticipated. The previous week's data has been revised to 228K from the previously reported 227K.
     
  • Elsewhere,  the Eurozone Consumer Prices Index (CPI) data for October has revealed higher-than-expected inflationary pressures. This,  combined with the positive surprise in the Q3 GDP, has dampened hopes of aggressive interest-rate cuts by the ECB, providing some support to the Euro (EUR).
     
  • The Bank of Japan (BoJ) kept interest rates unchanged on Thursday but Governor Kazuo Ueda signaled further monetary normalization if conditions are met. This has given some oxygen to a battered Japanese Yen (JPY), adding pressure to the USD.
     
  • Investors' focus now is on Friday’s Nonfarm Payrolls (NFP) report, which is expected to show a significant decline in new payrolls. If these figures are confirmed, the US Dollar could extend its correction. 

DXY technical outlook: Support at 103.90 is under pressure

The DXY index is showing an increasing bearish momentum, as failure to break the resistance area above 104.55 has increased bearish pressure towards the 103.90 area, which is being tested at the moment.

The 4-hour Relative Strength Index (RSI) indicator has crossed below its midline but turned higher, limiting the bearish potential of the index. At the same time,  it bounced from around a 100-period Simple Moving Average (SMA) but holds below a bearish 20 SMA. Further depreciation below 103.90 would confirm a deeper correction and bring 103.40 into focus. Resistances remain at at the 104.55-104.75 area and 105.20.

 

Employment FAQs

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD struggles near multi-month low below 0.6500 after Aussie jobs report

AUD/USD struggles near multi-month low below 0.6500 after Aussie jobs report

AUD/USD hangs near its lowest level since August 6 below the 0.6500 level following the release of rather unimpressive Australian employment details for October. Meanwhile, RBA Governor Michele Bullock said earlier on that interest rates were restrictive enough and will not rise any further. 

AUD/USD News
USD/JPY briefly pops 156.00 on firmer US Dollar

USD/JPY briefly pops 156.00 on firmer US Dollar

USD/JPY holds firm near its highest level since July 24, having briefly popped 156.00 in the Asian session on Thursday. The continuation of the Trump trade lifts the US Dollar to yearly highs while Japan's stimulus plans fail to inspire the Yen. Traders watch out for any Japanese internvetion risks.  

USD/JPY News
Gold downside appears unabated, with eyes on Fed Chair Powell

Gold downside appears unabated, with eyes on Fed Chair Powell

Gold price is sitting at its lowest level in two months near $2,560 early Thursday, as buyers eagerly await US Federal Reserve Jerome Powell’s speech for a brief respite.

Gold News
XRP's open interest drops over 10% amid struggles near $0.7440 resistance

XRP's open interest drops over 10% amid struggles near $0.7440 resistance

Ripple's XRP is trading near $0.6900, down nearly 3% on Wednesday, as declining open interest could extend its price correction. However, other on-chain metrics point to a long-term bullish setup.

Read more
Trump vs CPI

Trump vs CPI

US CPI for October was exactly in line with expectations. The headline rate of CPI rose to 2.6% YoY from 2.4% YoY in September. The core rate remained steady at 3.3%. The detail of the report shows that the shelter index rose by 0.4% on the month, which accounted for 50% of the increase in all items on a monthly basis. 

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures