U.S. Dollar Retreats As Unemployment Rate Rises

Key Insights

• U.S. dollar is losing ground as traders focus on the rising Unemployment Rate. 
• Commodity-related currencies rally as commodity markets rebound on hopes China will relax its anti-coronavirus policy. 
• USD/JPY drops to 146.50 after several unsuccessful attempts to settle above the 148.50 level.

U.S. Dollar Is Falling Ahead Of The Weekend

U.S. dollar is under strong pressure after the release of the U.S. job market reports, which indicated that Unemployment Rate jumped from 3.5% in September to 3.7% in October.

Traders ignored the strong Non Farm Payrolls report, which showed that the U.S. economy added 261,000 jobs in October. Treasury yields pulled back from yearly highs, which shows that traders believe that the Fed will be less hawkish due to the rising Unemployment Rate.

The U.S. dollar gained a lot of ground against a broad basket of currencies this year, and it will need significant catalysts to get back to yearly highs. Any data that could be interpreted as bearish may put material pressure on the American currency.

EUR/USD Rebounded Above 0.9900

EUR/USD moved back towards the 0.9900 level as traders reacted to the job market data from the U.S.

Traders also had a chance to take a look at the final reading of the Euro Area Services PMI report for October. The report indicated that Euro Area Services PMI declined from 48.8 in September to 48.6 in October, compared to analyst consensus of 48.2.

EUR/USD moved above the resistance at 0.9885 and is trying to get above the 50 EMA at 0.9910. In case this attempt is successful, EUR/USD will head towards the next resistance level, which is located at 0.9950. A successful test of the resistance at 0.9950 will push EUR/USD towards the resistance at 0.9975.

On the support side, the previous resistance level at 0.9885 will serve as the first support level for EUR/USD. In case EUR/USD declines below this level, it will move towards the next support at 0.9850. A successful test of the support at 0.9850 will push EUR/USD towards the support at 0.9810.

GBP/USD Gains Ground As Traders Focus On U.S. Job Market Data

GBP/USD has also moved higher after the release of the U.S. job reports. Currently, GBP/USD is trying to settle back above the 1.1300 level.

Yesterday, traders sold GBP/USD as the BoE warned about a long recession. In this light, it remains to be seen whether today’s rebound will be sustainable as the BoE may be less hawkish than Fed in the upcoming months.

AUD/USD Rallies Amid A Strong Rebound In Commodity Markets

USD/CAD dropped below the 1.3500 level as traders rushed to buy riskier currencies. Canada has also released its Unemployment Rate report today, which indicated that Unemployment Rate remained unchanged. This report had minimal impact on currency dynamics as traders remained focused on the general dynamics of the U.S. dollar.

Other commodity-relted currencies have also enjoyed strong support today on hopes China will relax its zero-COVID policy. AUD/USD moved above the 0.6450 level, while NZD/USD settled above 0.5900.

USD/JPY Tests The 146.50 Level

USD/JPY pulled back towards the 146.50 level as traders reduced their long positions in the U.S. dollar. USD/JPY has recently made several attempts to settle above 148.50, but these attempts yielded no results. As the resistance at 148.50 remained strong, traders decided to sell USD/JPY amid a broad sell-off in the U.S. dollar.

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