• US Nonfarm Payrolls report from April underperformed, showing a lower-than-expected increase.
  • The odds of a rate cut in September increased, which seems to be applying pressure on the USD.

The US Dollar Index (DXY) dipped to 105, suffering significant losses at the close of the trading week. This decline followed the release of April’s weak Nonfarm Payrolls (NFP) data, which led to a sell-off in the USD.The US economy shows mixed signals, with strong demand and a tight labor market contributing to moderate but meaningful wage growth, thereby influencing inflation. Federal Reserve Chair Jerome Powell remains cautious about inflation’s uncertain path, noting that restrictive monetary policy has cooled economic overheating. On Friday, weak labor data increased the likelihood of interest rate cuts in September.

Key Market Movers: DXY Declines on Weak NFPs

  1. The US NFP report showed a 175,000 job increase in April, below the expected 243,000, and a drop from March’s revised 315,000 increase.
  2. The unemployment rate rose from 3.8% to 3.9%.
  3. Average Hourly Earnings fell to 3.9% year-over-year, down from 4.1%.
  4. The likelihood of a Fed rate cut by September has grown due to weak labor figures.
  5. US Treasury yields fell, with the 2-year yield at 4.80%, while the 5-year and 10-year yields dropped to 4.50% and 4.58%, respectively.

DXY Technical Analysis: Bullish Outlook with Potential Bearish Turn

DXY’s technical perspective remains bullish, but a potential bearish reversal looms. The Relative Strength Index (RSI) shows a negative trend, indicating increased selling pressure. Despite this, the index is still trading above the 100- and 200-day Simple Moving Averages (SMAs).

Moreover, the Moving Average Convergence Divergence (MACD) shows increasing red bars, suggesting that bearish momentum is growing. The bearish trend should be noted, especially as the index fell below the 20-day SMA. Nonetheless, the longer-term SMAs offer robust support, maintaining the overall bullish outlook.

By Admin

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