DXY Down Deeper
The US Dollar continues to depreciate as we head through the back end of the week. Yesterday’s ADP jobs release saw 32k jobs lost in November, starkly lower than the 7k forecast and down sharply from the prior 42k reading. CME pricing for a cut from the Fed next week now stands at 87%. With yesterday’s job losses seen cementing expectations for a cut next week, USD looks likely to remain lower into next week. Today’s Challenger jobs will be on interest but unlikely to have much impact. As such, only a strong upside surprise in tomorrow’s core PCE number is likely to cause any hawkish repricing and that seems unlikely on the back of soft PPI and CPI recently.
Fed Expectations
The question for USD now is how dovish the Fed is likely to turn next week? If Powell cuts rates by the expected .25% cut refrains from signalling that furtehr easing is likely near-term, this will likely stymie any downside reaction in USD. However, if Powell cuts rates and signals the likely need for further easing near-term, dependent on incoming labour market data, this should keep USD sold into the December 16th NFP releases. That data will then likely guide USD direction through the end of the year. If the labour is seen remaining in weak territory, expectations of a furtehr cut in Q1 should keep USD weak into January. Any rebound in that data will dilute near-term easing chances allowing USD to recover.
Technical Views
DXY
The reversal lower from the 100.36 level is gathering pace now with price pushing deeper below the 99.15 support. With momentum studies firmly bearish, focus is on a test of deeper support at the 98.24 level and a retest of the broken bear channel highs. This will be a key pivot for the market which, if broken, turns prospects heavily bearish with 96.63 the deeper target to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.