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James Hyerczyk
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US Dollar Index

The U.S. Dollar retreated in dramatic fashion from a three-month high on Friday, driven lower by some of the sketchy details of the government’s month job report although the headline number exceeded expectations. Despite Friday’s price slide, the greenback was still finished the week with a 0.62% gain against a basket of major currencies.

On Friday, September U.S. Dollar Index futures settled at 92.413, down 0.181 or -0.20%.

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The government report showed that U.S. non-farm payrolls did beat expectations, increasing by 850,000 jobs last month after rising 583,000 in May. But the unemployment rate rose to 5.9% from 5.8% in May, while the closely-watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month, lower than the consensus forecast for a 0.4% increase.

U.S. Treasury yields dipped on Friday after the report. This made the U.S. Dollar a less-attractive investment.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, the formation of the closing price reversal top on Friday suggests the selling may be greater than the buying and that momentum may be getting ready to shift to the downside.

A trade through 92.760 will negate the closing price reversal top, while a move through 92.170 will confirm the potentially bearish chart pattern. This won’t change the trend to down, but it could trigger the start of a 2 to 3 day correction. The main trend changes to down on a trade through the last main bottom at 91.505.

The main range is 94.572 to 89.130. Its retracement zone is 91.850 to 92.495. After crossing to the bullish side of its retracement zone on Friday, the index settled inside it.

The intermediate range is 93.430 to 89.545. Its retracement zone at 91.490 to 91.950 is potential support. The index could break sharply if this zone fails.

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Short-Term Outlook

The next major move by the index will be determined by trader reaction to the retracement zone at 91.850 to 92.495.

In other news, U.S. Dollar Index net shorts fell to their lowest level since late April, according to calculations by Reuters and Commodity Futures Trading Commission (CFTC) data released on Friday.

The value of the net short dollar position dropped to $10.44 billion in the week ended June 29, from net shorts of $12.80 billion the previous week. U.S. Dollar net short contracts slid for a second straight week.

The dollar has gained ground ever since the Federal Reserve took a surprising hawkish stance at its monetary policy meeting last month. Fed forecasts have penciled in two U.S. rate increases by the end of 2023.

For a look at all of today’s economic events, check out our economic calendar.
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