The dollar index rose in volatile trading on Friday after data showed U.S. employment grew less than expected in August, but indicated only a steady slowdown in the labor market, likely supporting gradual interest rate cuts by the Federal Reserve.
After hitting a low 100.58, the currency rebounded strongly and settled at 101.1870 up 0.13%. on the weekly basis booked half percent fall.
The data released on Friday, showed that, US Nonfarm payrolls increased by 142,000 jobs last month after a downwardly revised 89,000 rises in July, the Labor Department’s Bureau of Labor Statistics said on Friday.
The dollar, which initially fell against most major peers after the release of the jobs data, soon recovered ground to trade higher. The U.S. currency, a traditional safe haven, also found support as stocks and other risky assets sold off on Friday.
Traders now see a 31% chance that the Fed will cut its policy rate, now in the 5.25% to 5.50% range, to a 4.75% to 5% range at its upcoming meeting on Sept 17-18, according to LSEG data. Before the report they had seen about a 43% chance of that outcome, favoring instead a quarter-point reduction.
Safe haven demand and expectations for imminent rate hikes from the Bank of Japan have helped support the Japanese currency in recent sessions.
Traders have sold the dollar against other currencies fairly consistently over the last couple of months, as concern has risen that a slowing U.S. economy will require chunky rate cuts.
Furthermore, Federal Reserve policymakers on Friday hinted they are ready to kick off a series of interest rate cuts at the U.S. central bank’s meeting in two weeks, noting a cooling in the labor market that could accelerate into something more dire in the absence of a policy shift.
Fed Chair Jerome Powell signaled that the central bank’s focus was shifting from fighting inflation to preventing deterioration in the job market when he strongly endorsed an imminent start to the monetary easing cycle at the annual economic conference in Jackson Hole last month.
This week US CPI and PPI data is due to released which will decide further direction for the currency.
Technical Outlook : Dollar Index
The dollar index witnessed sharp bounced from the weekly low 100.58 and settled at 101.18 as compared to the previous week close of 101.7350.
Since last three week, the dollar index consolidation above the crucial support 100.50 and forming almost same bottom candle stick. Further, RSI 14 and its 9 SMA is treading at oversold zone.
Hence, above technical aspects is indicating for short time bounce in a near future. However, upside move likely to limited amid Fed rate cut jitters.
On the upside, immediate resistance is seen at 101.98 above it currency could test next resistance 102.32-102.4250.
On the downside, a break below 100.48 only would extend the fall and dollar index could drop towards 100.25-99.98.
Happy trading!
Commodity Samachar Securities
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