Sat, Mar 25, 2023 @ 05:11 GMT
HomeContributorsTechnical AnalysisDollar Extends Losses ahead of Nonfarm Jobs Report

Dollar Extends Losses ahead of Nonfarm Jobs Report

Market update: As we transition to the latter parts of the working week, the focus will be shifting towards OPEC and oil prices, as well as the US economy with Friday’s jobs report set to take centre stage. Elsewhere, the pound remains in focus as we get closer to the December 12 UK snap election. Sterling’s ongoing rally prevented the FTSE from staging a similar rebound we saw in other global stock markets yesterday. Today, the FTSE fell again, and US equity markets struggled shortly after the open amid confusion over the US-China trade situation and concerns over valuations.

Dollar under pressure: The surging British pound has also helped to keep the Dollar Index under pressure, now down for the fifth consecutive day. The buck has also been undermined by a rallying Canadian dollar after the Bank of Canada’s hawkish rate hold the day before. Also pressuring the DXY is the euro, which pushed higher today despite poor European data as Eurozone retail sales and German factory orders both fell more than anticipated. If stock markets were to fall further then the yen may strengthen on haven demand, which could provide the final nail in the coffin for the Dollar Index.

NFP eyed: The dollar will be impacted more directly from US data tomorrow when the nonfarm payrolls report is released. My US colleague Matt Weller will be posting an NFP preview article shortly on our website. But if jobs disappoint and disappoint badly, then the markets may start to price in a sooner-than-expected rate cut in 2020. However, a surprisingly strong showing could help alleviate the pressure currently being exerted on the buck.

Dollar Index breaking down: Thanks to the surging back of the above foreign currencies, the DXY has been trending lower since peaking in early October at just shy of 100.00. On Friday of last week, the DXY made a distinct lower high in the form of a false break reversal above a short-term peak. As result of that false break out attempt, we have seen continued falls throughout this week. The index has now broken below a short-term low and also the 200-day moving average. At the time of writing, the DXY was around 35 points shy of taking out the old lows around 97.10. Standing in the way of that liquidity pool was short-term support around 97.45. So, this 97.45 level needs to give way if we are to see the DXY take out 97.10, and in the process form another lower low. I think it may be only a matter of time before that low is taken out, judging by recent price action.
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Featured Analysis

Learn Forex Trading