- A stabilization in risk sentiment continues to provide support for the United States Dollar, despite the fact that there are no new fundamental factors that are influencing its performance.
- Even though the rate of employment growth has been slowing down, federal officials have expressed optimism regarding the state of the labor markets in the United States.
- The expectations of the market are being adjusted, and the first rate cut is now anticipated to take place in September from this point forward. There has been a slight reduction in the likelihood that this will occur.
In the session that took place on Friday, the United States Dollar (USD), as measured by the United States Dollar Index (DXY), exhibited a horizontal trend that was higher than the level of 103.00. This takes place in the midst of consistent risk sentiment and a lack of movement in trading in US stock index futures following the surge that occurred on Thursday. The yield on the 10-year US Treasury note remained around 4% early in the day.
Although there have been shifts in market expectations regarding future decisions regarding monetary policy, the economic outlook for the United States continues to indicate growth that is above average. This suggests that the market may be anticipating aggressive easing a little too soon.
The US Dollar Remains Steady as Federal Reserve Officials Emphasize the Robustness of the Labor Market
- Officials from the Federal Reserve (Fed) provided some insights into the labor market. They expressed the belief that the market is not in a dire state despite the slow growth in employment, which was one of the perspectives they provided.
- Barkin observed that businesses are controlling their workforce by relying on natural attrition or slowing down the pace of hiring rather than resorting to layoffs. This indicates a prudent approach to the market, and there are no indications of panic.
- Schmid stated once again that inflation is getting close to the desired range and that the path the economy is taking will determine the course of action.
- On the other hand, Goolsbee cautioned that it is of the utmost importance to determine whether the job market slowdown is a temporary occurrence or a trend that will continue for an extended period.
- In addition, the weekly data on jobless claims helped to calm the markets, as initial claims were lower than expected, at 233 thousand, whereas the anticipated number was 240 thousand.
- Taking into account the current market pricing, there is a relatively low likelihood of an immediate cut, whereas the possibility of a cut occurring in September is relatively high. As a result of these estimates, it appears that the markets are still fully incorporating the likelihood of 100 basis points of easing by the Federal Reserve by the end of the year, in addition to 175-200 points of overall easing over the following year.
Bearish Sentiment Remains as Buyers Face Challenges in Achieving Substantial Progress
Despite the fact that buyers are having difficulty making significant progress, the DXY forecast remains pessimistic. The index continues to trade below the Simple Moving Averages (SMAs) for the 20, 100, and 200-day time periods, which indicates that a bearish sentiment is currently prevalent.
The Relative Strength Index (RSI), which measures momentum, continues to be below 50, which indicates that selling pressure is still present. The MACD continues to show lower red bars, which is another exciting development. Despite some gains this week, the overall technical outlook has yet to show a significant improvement. That being said, there is still the possibility of a correction.
There are three different levels of support: 103.00, 102.50, and 102.20. The levels of resistance are 103.50 and 104.00, respectively.