The US Dollar surged on Friday, following a robust Non-Farm Payroll (NFP) report that significantly exceeded expectations. September’s employment data not only showcased strong job growth but also revised upwards previous months’ figures. This unexpected strength dashed market hopes for a substantial interest rate cut in November, reinforcing the Federal Reserve’s ongoing battle against inflation.
The US Dollar extended its winning streak to five consecutive trading days, buoyed by a stronger-than-anticipated Non-Farm Payroll report. The robust job growth and decline in the unemployment rate significantly diminished market expectations for the Federal Reserve to deliver another aggressive interest rate cut in November.
The unemployment rate dipped to 4.1% from 4.2%, highlighting the resilience of the US labor market. Furthermore, upward revisions to previous months’ NFP data underscored the ongoing strength of the job market. Average hourly earnings also outperformed expectations, increasing by 4.0% year-over-year.
In light of these favorable economic indicators, market participants have scaled back their bets on a more substantial rate cut in November. According to the CME’s FedWatch Tool, traders now overwhelmingly anticipate a modest 25 basis point reduction in the federal funds rate, with only a small minority expecting no change at all.
Technical overview of the Dollar Index
The Dollar Index has experienced a significant uptrend this week, recovering from approximately 100 to reach a peak slightly above 102. Prior to this rally, the market had been in a sustained downward trajectory, declining from around 106 to the 100 level.
While the Bollinger Bands indicate a potential overbought condition, the RSI reading of 106 suggests that there may still be room for further upward momentum. Despite the volatility implied by the Bollinger Bands, the price action could continue when the market resumes trading, potentially reaching above 103.
Get free access to our lifetime VIP membership. Join us here.
Leave a Reply