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US Dollar Index News: DXY Dips Amid Weak August Job Growth, Eyes on Payrolls.

By:
James Hyerczyk
Updated: Aug 30, 2023, 13:56 GMT+00:00

DXY faces pressure from dwindling job growth, as August's ADP figures missed expectations while caution precedes the non-farm payrolls announcement.

US Dollar Index (DXY)

Highlights

  • DXY sees a dip, influenced by August’s underwhelming ADP job growth report.
  • ADP reveals stark contrast in job numbers: 177,000 in August vs. revised 371,000 in July.
  • U.S. JOLTS data for July stirs concern, intensifying speculation around the Federal Reserve’s peak rate.

U.S. Dollar Response to Labor Market Data

The U.S. Dollar (DXY) witnessed a decline against its major counterparts, influenced by the recent ADP report that showed a significant slowdown in U.S. job growth for August. The report’s figure stood at 177,000, missing expectations and piling on the already dwindling sentiment post the disappointing U.S. JOLTS job openings for July. With market participants keyed in on weaker U.S. data, expectations are rife about the possible peak rate of the Federal Reserve. Yet, while this generates speculation regarding the state of yields and the dollar, caution remains ahead of Friday’s pivotal non-farm payrolls report.

August’s Employment Landscape

Delving deeper into the employment scenario, the ADP highlighted that the private sector saw an addition of 177,000 jobs for the month, a sharp contrast to July’s revised 371,000. This number was also notably below the 200,000 that economists had anticipated. Additionally, ADP’s findings brought to light the deceleration in pay growth across both categories – workers shifting jobs and those retaining their positions. Such figures echo a return to the pre-pandemic pace of job creation, signaling a phase of sustainable growth as pandemic-induced economic ramifications begin to wane.

Economic Implications and Inflationary Concerns

The present backdrop presents a conundrum for economists and investors, as they grapple with the inflation trajectory for the U.S. The overarching question remains: Can the U.S. see inflation return to the 2% mark without the economy taking a significant hit? The robust labor market was pivotal in driving the economy’s performance, surpassing many 2023 projections. This dynamism subsequently saw the Federal Reserve ramping up rates in July, marking the highest increase in over two decades.

Anticipating the Non-Farm Payrolls

While the ADP report has historically acted as a precursor to the Department of Labor’s monthly jobs assessment, a change in its methodology last year has clouded its predictive capabilities. Nonetheless, all eyes are set on the upcoming non-farm payrolls data scheduled for release on Friday.

Global Currency Movements

In other currency news, the euro held its ground against the dollar, spurred by heightened inflation in Germany and Spain. This has steered expectations towards a potential European Central Bank rate hike. The British pound, on the other hand, maintained stability, even as data indicated reduced borrowing by British consumers in July. Lastly, the Canadian dollar gained momentum against its U.S. counterpart, leading to a dip in the yield of its benchmark government debt.

Technical Analysis

4-Hour US Dollar Index (DXY)

The US Dollar Index (DXY) is currently trading at 102.998. This is situated below its 50-4H moving average of 103.683, signaling a bearish momentum. However, it’s trading slightly above its 200-4H moving average of 102.353, indicating some support at this level.

The 14-4H RSI stands at 31.36, suggesting the DXY is in an oversold territory, which may imply a potential bounce or consolidation in the near term.

While the current price hovers near the main support at 103.013, it remains below the resistance zone of 104.299 to 104.403. Overall, with the mixed moving average signals and an oversold RSI, the immediate sentiment leans bearish, but with potential for a short-term reversal.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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