U.S Dollar Seeks A Lift From U.S Payroll Data

A basket of currencies rose against the dollar on Tuesday, as investors awaited the release of U.S jobs figures later this week to determine whether the taper will begin.

Federal Reserve Chair Jerome Powell on Friday did not offer any hints on when the central bank will cut its asset-buying other than to say it would probably happen “this year.” The dollar index stood at 92.590, its lowest level in two weeks.

Following Friday’s moderate selloff post-Powell, the DXY bulls are holding the line within a narrow range within the 92.50 bands.

The index is seen re-visiting the lower 92.50s if the selling bias continues, where some initial contention emerges. The 55-day SMA at 92.46 reinforces this support area.

Specifically, it appears that by keeping the index above its 200-day SMA, which is currently at 91.32, the positive outlook on the dollar is expected to remain unchanged.

In Jackson Hole, he did not offer a timetable for the taper, which left the market more confident that a move will occur in September. Nevertheless, it was Powell’s and other Fed speakers’ way of presenting the taper message that brought a new perspective.

Given the focus on the Fed’s taper, the payroll data will be a highlight. A positive reading will increase expectations the Fed will announce its taper plans in September before it formally announces them in November.”

If Friday’s jobs report is weak, it could cement the case for a postponement – a pre-announcement in November with a formal announcement in December.

At the same time, the offshore Chinese yuan held at 6.466 per dollar, not far from the highs reached Friday. Chinese economic indicators indicated that pressure is intensifying on the economy as the economy’s two Purchasing Manager’s Indexes (PMI) increased.

Factory activity expanded at a slower pace in April as the manufacturing PMI dropped to 50.1 from 50.4. August’s non-manufacturing PMI plunged to 47.5, the lowest reading since February 2020, due to restrictions due to the Coronavirus outbreak.

Coronavirus impact has been reflected in the reduction in the Nonmanufacturing PMI. Nevertheless, the infection rate has already peaked in China and is declining