US Dollar Index
The dollar index is trading within a narrow range on Friday morning and expected quiet mode, as markets await release of the US NFP report, key event of the week.
Near-term action remains above trendline support (106.01), following a two-day pullback from new 2023 peak (107.03) which so far looks like a healthy correction of a larger uptrend and offering better levels to re-enter bullish market.
Bullish daily studies continue to support the action for renewed attack through pivotal 107.00 resistance zone (50% retracement of 114.72/99.20 / psychological / weekly cloud top) break of which would signal bullish continuation.
However, fundamentals are likely to play a key role in signaling direction today, as traders look for more clues about the condition in the US labor market, which will directly influence Fed’s view on interest rates in the near future.
US job growth is expected to slightly slow in September (NFP Sep 170K f/c vs Aug 187K), but unemployment rate is expected to ease from 1 ½ year high (Sep 3.7% f/c vs Aug 3.8%) and wage growth expected to remain elevated (Sep 0.3% vs Aug 0.2%).
Forecasted numbers suggest that the US labor sector remains resilient and the least impacted from high borrowing cost among the economy’s key pillars, with expected small easing not to significantly impact overall positive picture.
The Federal Reserve would, in such conditions, opt for another rate hike by the end of the year, or more likely, keep monetary policy tight for some time, as recent drastic measures in putting inflation under control, still did not provide desired impact on the economy.
The other two reports from the US labor sector, released earlier this week, were mixed as job openings rose well above forecasts, while hiring in private sector fell significantly last month.
Better than expected numbers in Sep NFP report would add to Fed’s hawkish stance and subsequently further support the dollar, while demand for greenback would ease on NFP miss.
Expect initial direction signals on sustained break of trendline support (bearish) or lift above 107.00 zone pivotal barriers (bullish).
