Dollar Supported by Strong Data Ahead of NFP
Strong US Data
The US Dollar is back in the green today as traders digest the latest US data from yesterday. The ADP employment figure jumped to 63k from 22k prior, well above the 50k the market was looking for. Similarly, the ISM services reading tracked the moves we saw earlier in the week with manufacturing and surged higher to 56.1 from 53.8 prior, above the 53.5 the market was looking for. With a strong set of ISM data this week and the beat on ADP, traders are eyeing a reduced likelihood of Fed easing near-term.
Fed Expectations Shift
Indeed, Fed rates pricing on the CME has shifted firmly this week as a result of the conflict with Iran with a cut now not seen until September. The surge in energy prices as a result of the conflict has raised fears of a fresh inflationary cycle in the US, creating a barrier for Fed easing. The market had been marginally in favour of a July cut earlier this week but yesterday’s strong data has now seen this projection pushed back to September.
Jobless Claims Next
Looking ahead today, traders will be watching the weekly jobless claims number expected at 215k from 212k prior. If we see a downside surprise, this will be firmly bullish for USD into tomorrow’s headline NFP data set. The Fed has recently signalled that labour market weakness has become less of a threat and should tomorrow’s data endorse that view, USD could well see a fresh push higher as Fed rate cut projections are pushed back further. Additionally, any fresh move higher in energy prices will also keep USD supported near-term.
Technical Views
DXY
For now, DXY remains capped by the 99.15 level resistance following the breakout above the bear channel highs. With momentum studies bullish, focus is on a fresh push higher with the 100.36 level the next target for bulls. To the downside, 98.24 will be the key support to watch along with a retest of the broken bear channel highs.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.