- The US Dollar sells off in the US session with Challenger Job Cuts and Jobless Claims ticking up ahead of Friday’s NFP.
- In France Marine Le Pen uses momentum to try and push through here agenda ahead of President Emmanual Macron’s speech.
- The US Dollar Index (DXY) failed to close above the pivotal 106.50 level and undergoes harsh rejection.
The US Dollar (USD) is selling off this Thursday ahead of Friday’s US Nonfarm Payrolls print in the US Jobs Report for December. The depreciation of the Greenback got triggered with on one had very bearish data from the weekly Initial Jobless Claims and the November Challenger Job Cut data where both elements pointed to a pickup in layoffs. Meanwhile in France the Far Right party with Marine Le Pen is using the momentum to try and push forward here fiscal agenda ahead of President Emannuel Macron’s speech later this Thursday.
On the economic data front, all US data has been released. Adding up all things together for this week with the numbers from the Institute for Supply Management, the S&P Global Purchase Managers Index numbers and the Jobless data, traders are not seeing a pretty picture for Friday’s Nonfarm Payrolls report. Risks are that another downbeat print could mean more US Dollar weakness to come to close off this week.
Daily digest market movers: Markets are pricing in what data tells them
- The Challenger Job Cuts report for November came in more bearish than the October one. The November number came in at 57,727.00 layoffs against the 55,597.00 layoffs seen in October.
- Paul Atkins has been nominated to become the Chair of the US Securities and Exchange Commission (SEC) by President-elect Donald Trump. Bitcoin (BTC) got fired up on the back of that news and broke above $100,000 for the first time. Paul Atkins is known for being a Bitcoin enthusiast.
- Weekly Jobless Claims data for the week ending November 29 was a big beat of expectations, coming in at 224,000, over the 215,000 expected and higher from 213,000 last week.
- Equities trade very mixed this Thursday. Despite the French political turmoil, European stocks are up near 0.50%. US equities keep struggling after the US Opening Bell.
- The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 74.0%. A 26.0% chance is for rates to remain unchanged. The Fed Minutes and recent comments from several Fed officials have helped the rate cut odds for December to move higher.
- The US 10-year benchmark rate trades at 4.21%, roughly in the middle of this week’s range between 4.16% and 4.28%.
US Dollar Index Technical Analysis: Friday’s NFP might deliver the final blow
The US Dollar Index (DXY) is turning into a snooze fest, not set to wake up before the US Jobs report on Friday. With some lighter US data, only headline risk could take place in an otherwise calm Thursday. With the tight range in the US Dollar Index, the nearby levels at 106.52 and 105.53 remain pivotal to watch.
On the upside, 106.52 (April 16 high) still remains the first resistance to look at after failing to close above it this week after several attempts. Should the US Dollar bulls reclaim that level, 107.00 (round level) and 107.35 (October 3, 2023, high) are back on target for a retest.
Looking down, the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation.
US Dollar Index: Daily Chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
