US Dollar steady with traders on edge of the US Jobs Report while DXY is at crossroad
- The US Dollar sees its rally stall while traders await US Jobs Report.
- Tensions in the Middle East together with pared bets of big Fed rate cuts are fueling safe-haven inflows to the Greenback.
- The US Dollar Index flirts with potentially breaking out of the September range after a false break on Thursday.
The US Dollar (USD) consolidates on Friday after trading firmly stronger this week, with all eyes on the US Employment Report and specifically on the Nonfarm Payrolls (NFP) numbers. The data will be pivotal as strong figures could move the DXY further away from the tight range it has been moving so far this month. Meanwhile, if numbers turn out weaker than expected, the Greenback could fall back into the range .
The economic calendar is housing only one main element: the aforementioned US Jobs Report. As always, the Nonfarm Payrolls print will take the most attention. However, elements such as the Average Hourly Wages and the Unemployment Rate could be the second-tier data that in the end will drive the US Dollar higher or lower after the initial volatile reaction.
Daily digest market movers: Risk over the weekend with Israel
- Expect some volatile moves in the Greenback if Israel strikes Iranian Oil fields. At the time of writing, discussions between Israel and the Biden administration for a green light on the attacks are still ongoing.
- At 12:30 GMT, the US Jobs Report for September is due:
- Nonfarm Payrolls are expected to fall to 140,000, coming from 142,000 in August.
- Monthly Average Hourly Earnings should ease further, to 0.3% from 0.4%.
- The Unemployment rate is expected to remain unchanged at 4.2%.
- At 13:00 GMT, Federal Reserve Bank of New York President John Williams delivers opening remarks at the event “The Future of New York City: Focus on Jobs” organized by the New York Fed.
- Equities are rebounding a touch across the board with Japan having closed off this Friday in the green. European equities post small gains, while US futures are flat.
- The CME Fedwatch Tool shows a 69.3% chance of a 25 basis-point rate cut at the next Fed meeting on November 7, while 30.7% is pricing in another 50-basis-point rate cut.
- The US 10-year benchmark rate trades at 3.86%, a 30-day high.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
US Dollar Index Technical Analysis: False break or just the start?
The US Dollar Index (DXY) has made a stellar recovery this week with the cherry on the cake Thursday, when it was able to break out of September’s range. The 55-day Simple Moving Average (SMA) at 102.05 has refused to let the DXY trade higher and shows its strength as a resistance level. Expect the US Jobs Report to be the catalyst that snaps that level for more upside or sees the DXY fall back into range.
The 55-day Simple Moving Average (SMA) at 102.05 has already acted as resistance and is the first level that needs to be broken for more upside. A leg higher, the chart identifies 103.18 as the very final level for this week. Once above there, a very choppy area emerges with the 100-day SMA at 103.36, the 200-day SMA at 103.75 and the pivotal 103.99-104.00 levels in play.
On the downside, 100.62 is flipping back from resistance into support in case the DXY closes above it this week. The fresh low of 2024 is at 100.16, so a test of this level should take place before more downside. Further down, and that means giving up the big 100.00 level, the July 14, 2023, low at 99.58 comes into play.
US Dollar Index: Daily Chart
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.24% | 1.60% | 2.96% | 0.31% | 0.89% | 2.16% | 1.21% | |
| EUR | -1.24% | 0.36% | 1.71% | -0.88% | -0.28% | 0.95% | 0.05% | |
| GBP | -1.60% | -0.36% | 1.49% | -1.24% | -0.64% | 0.58% | -0.31% | |
| JPY | -2.96% | -1.71% | -1.49% | -2.51% | -2.05% | -0.74% | -1.65% | |
| CAD | -0.31% | 0.88% | 1.24% | 2.51% | 0.62% | 1.85% | 0.94% | |
| AUD | -0.89% | 0.28% | 0.64% | 2.05% | -0.62% | 1.23% | 0.32% | |
| NZD | -2.16% | -0.95% | -0.58% | 0.74% | -1.85% | -1.23% | -0.91% | |
| CHF | -1.21% | -0.05% | 0.31% | 1.65% | -0.94% | -0.32% | 0.91% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).