- The USD strengthened, trading above the 200-day SMA at 103.70 on Monday.
- Increased tensions between Israel and Hamas led investors to seek refuge in the USD.
- Key US economic reports set for release today: ISM Services PMI, ADP Employment Change, November Nonfarm Payrolls, and Unemployment Rate.
The United States Dollar (USD) moved higher on Monday, with the Dollar Index (DXY) surpassing the 103.70 level, above the 200-day Simple Moving Average (SMA), amid growing Treasury yields.
Looking ahead, important drivers are on the horizon as investors await Friday’s release of Nonfarm Payrolls for November and the Unemployment Rate. Meanwhile, the ISM Services PMI is due on Tuesday, and the Automatic Data Processing (ADP) Employment Change report will be released on Wednesday.
Despite mixed signals from the US labor market and cooling inflation in the US economy, Federal Reserve (Fed) officials have hinted at the possibility of further policy tightening, signaling a subtly hawkish stance. Today’s key labor market data will impact expectations and the Fed’s policy trajectory, which could define the short-term direction of the United States Dollar.
Daily Market Movers: USD strengthens ahead of labor market data
- The US Dollar is currently trading with gains, with the DXY Index showing a positive upward trend comfortably above 103.70.
- The USD’s upward trend appears to be driven by a sour market mood and rising bond yields.
- No significant reports have emerged during the session that could impact the USD’s current trajectory.
- Market participants are focused on key economic reports due today, including Nonfarm Payrolls, Unemployment Rate, ADP Employment Change, and ISM Services PMI updates, scheduled for release on Friday, Wednesday, and Tuesday, respectively.
- Overall, all reports are expected to show job growth in November, while the ISM Services PMI is anticipated to accelerate compared to its previous reading in October.
- US bond yields are rising, in line with the Dollar’s uptick, especially the 2, 5, and 10-year yields, which are trading at 4.65%, 4.24%, and 4.29%, respectively.
- The CME FedWatch Tool indicates no hikes are priced in for the upcoming December meeting, and markets speculate on rate cuts in mid-2024.
Technical Analysis: US Dollar struggles amidst negative zone RSI and suppressed SMAs
The indicators on the daily chart suggest a predominance of selling momentum. The index position below the 20 and 100-day Simple Moving Averages (SMAs) indicates that the bears are maintaining control. This is also evident from the Relative Strength Index (RSI), which shows a positive slope but remains in negative territory, revealing that although buyers are gaining some strength, they have yet to overpower the sellers.
The Moving Average Convergence Divergence (MACD) signifies diminishing red bars, providing further evidence of waning selling momentum.
