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Strong NFPs Boost Us Dollar to Best Week Since September

Leon Kramer

ByLeon Kramer

Dec 12, 2023

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  • The DXY Index exceeded the 20-day SMA to around 104.05 and will end the week with a 0.75% gain.
  • The US nonfarm payrolls (NFPs) in November sped up, and so did the average hourly earnings. The rate of people without jobs went down.
  • Next Tuesday, the US will release the Consumer Price Index (CPI) inflation data.

The USD kept leading the money markets as it rose to the 104.05 level, primarily due to good job market numbers and a sudden return increase, indicating that markets are postponing reducing interest rates in 2024. The USD Index (DXY) went up because of economic reports from November, especially Average Hourly Earnings, Unemployment Rate, and Nonfarm Payrolls. These reports made people think that the Federal Reserve (Fed) might be more likely to increase interest rates. 

Changing US inflation numbers in October caused people to think that the Federal Reserve might be more cautious in November. But, the signals from Fed officials about possibly making monetary policy stricter are reducing these expectations, and the positive labor market data confirms the bank’s careful approach, as they want more proof that the economy is slowing down. The upcoming inflation numbers from November and next week’s Fed meeting will play a significant role in deciding where the USD will go shortly.

The United States Dollar Is Gaining Value as a Result of Positive Labor Market Statistics

  • The appreciation of the United States dollar is currently being observed, propelled by robust labor market indicators and an upward trajectory in yields. 
  • Based on the data provided by the US Bureau of Labor Statistics, the month-over-month Average Hourly Earnings for November exhibited a noteworthy uptick of 0.4%. This surpassed the consensus forecast of 0.3% and the previously recorded figure of 0.2%.
  • The Nonfarm Payrolls data for November revealed an increase of 199,000 jobs in the United States economy, exceeding the consensus forecast of 180,000 jobs and surpassing the previous figure of 150,000 jobs.
  • The reported Unemployment Rate stands at 3.7%, surpassing the previously projected value of 3.9%. 
  • The current market conditions indicate an upward trend in US bond yields, as evidenced by the increase in rates for 2-year, 5-year, and 10-year bonds to 4.72%, 4.24%, and 4.23%, respectively.
  • According to the CME FedWatch Tool, the prevailing market sentiment suggests an absence of expectations for a rate hike during the upcoming December Federal Reserve meeting. However, it is worth noting that there is a projection for a reduction in the degree of monetary easing in 2024.
  • The upcoming week will witness the scheduled release of the Headline and Core Consumer Price Index (CPI) for November. This data holds significant importance as it is expected to be crucial in shaping the market’s expectations regarding the Federal Reserve’s future decisions.

Although Bulls Have Entered the Picture, Bears Continue to Hold the Upper Hand

The indicators observed on the daily chart depict a state of short-term ambiguity within the context of the US Dollar. The Relative Strength Index (RSI) exhibits a positive slope, albeit within the confines of hostile territory. The observed trend indicates increased purchasing momentum; however, it lacks the strength to ascertain a full-fledged recovery conclusively. In contrast, the graph of the Moving Average Convergence Divergence (MACD) measure exhibits a congruent depiction characterized by green bars, indicating a gradual reduction in selling pressure. 

Regarding the Simple Moving Averages (SMAs), it is observed that the index currently resides above the 20-day SMA while simultaneously remaining below the 100-day SMA. However, the 200-day Simple Moving Average (SMA) shows that the benchmark index is currently situated within a predominantly bullish territory. 

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The apparent resilience exhibited by bulls, coupled with a temporary pause in bearish activity, suggests a potential shift in the balance of power between sellers and buyers. The US Dollar Index must demonstrate a consistent upward movement surpassing the 100-day Simple Moving Average (SMA) to change the current selling momentum. The comprehensive technical perspective exhibits a cautiously balanced inclination toward the downside.

  • The support levels for the given asset are as follows: 104.00, corresponding to the 20-day Simple Moving Average (SMA), 103.50, and 103.30.
  • The resistance levels for the given asset are as follows: 104.40, corresponding to the 100-day Simple Moving Average (SMA); 104.50; and 104.70.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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