Non-Farm Payrolls Report Sends US Dollar Lower: What Next for the Greenback?

 | Sep 01, 2023 21:56

  • The US Dollar appears poised to continue to move lower after latest economic data
  • The euro, on the other hand, has been pricing in the possibility of further rather hikes from the ECB
  • Meanwhile, XAU/USD tests support 

    • This week witnessed notable fluctuations in the global Forex market, particularly with the release of data from both the US and the Eurozone.

    In the midst of these developments, the US dollar displayed signs of short-term vulnerability vulnerability when compared to major global currencies. As a result, the greenback appear poised to turn lower after a remarkable six-week streak of gains. The index, which had held at 103.66, experienced a modest weekly decline of half a point and could potentially end this positive trend if it closes below 104.1.

    That's mostly because throughout the week, US economic data hinted at a possible slowdown. Notably, both US Gross Domestic Product (GDP) and ADP NonFarm Payrolls figures fell short of expectations. Conversely, recent data releases showed personal consumption expenses aligning with projections while unemployment benefit applications remained below anticipated levels.

    Shifting our focus to the Euro Area, core inflation remained consistent with forecasts, while the annual Consumer Price Index (CPI) exceeded expectations by 0.2 percent. This current situation in Europe has cast doubt on the likelihood of the European Central Bank (ECB) maintaining unchanged interest rates in September.

    Now, let's delve into the technical aspects of the DXY movement in light of the latest developments.

    Last week, the DXY broke out of a bearish horizontal channel with a closing value of 104 but seemed inclined to retest the upper boundary of this channel this week, exhibiting a mild easing. While there isn't yet concrete confirmation of an upward breakout for the DXY, reaching the 105 level assumes importance for validating the dollar's strength.

    However, if the market prices in the likelihood of the US maintaining its interest rates in September, we might observe a continued decline in the DXY, reverting to the channel pattern. From a technical standpoint, the pivotal level to watch is at 103, which could determine the index's direction moving forward.