- DXY extends Friday’s bearish move, refreshes intraday low of late.
- US NFP, fears over economic growth probe Fed tapering.
- Wednesday’s FOMC minutes will flash the light on policymakers’ concerns for tapering tantrums.
- US Columbus Day holiday challenges the momentum traders.
US Dollar Index (DXY) drops towards 94.00, down 0.04% intraday around 94.06 by the press time of early Monday.
The greenback gauge was weighed down by the US jobs report for September the previous day. Also challenging the quote could be the latest fears for the US economic growth. However, the Fed’s optimism joins the geopolitical fears to keep the buyers hopeful.
The headline Nonfarm Payrolls (NFP) disappointed markets with 194K figures, much lower than around 500K expected. It should be noted, however, that the prior reading got an upward revision to 366K. On the same line, the Unemployment Rate dropped to 4.8%, versus 5.1% expected and 5.2% prior, soothing the pains, whereas Average Hourly Earnings also jumped past 0.4% expected and revised down previous readouts of 0.4% to 0.6%.
Following that, Goldman Sachs came out with another downward revision to the US economic growth, per Bloomberg news. The report cites watered-down GDP growth forecasts for 2021 to 5.6% versus 5.7% expected prior. Going further, the GS expects the US economy to grow by 4.0% compared to 4.4% previous expectations.
“The two main challenges to growth in the medium-term were a slowing of fiscal support and the need for spending on services to bounce quickly enough to offset a decline in the purchases of goods,” said Goldman per Bloomberg.
This challenges the Fed’s tapering path and boosts hopes for the US stimulus, which in turn reduces the US dollar’s safe-haven demand.
On the contrary, the reflation risk joins the US-China tussles, recently over the phase one deal and Taiwan, to keep the DXY bulls hopeful.
Amid these plays, S&P 500 Futures track Wall Street’s losses to drop 0.50% at the latest. US Treasury yields remain inactive amid a partial trading holiday in the US.
Moving on, Monday is likely to be a dull day for the greenback watchers but the Federal Open Market Committee (FOMC) Minutes for the latest monetary policy meeting will be the key as the meeting hinted at November tapering. The bulls will be watching for the Fed hawks’ excuses to defend the tapering while the bears may cite fears to consolidate the recent gains.
Technical analysis
US Dollar Index consolidates recent gains between August highs and November 2020 tops, respectively around 93.70 and 94.30. Given the overbought RSI conditions and the recent fundamental challenges for the US dollar stated above), the bulls seem to require caution.
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