US Dollar add another tailwind with strong jobs data on Thursday – Crypto News – Crypto News
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US Dollar Index eyes to regain 109.00 ahead of US Durable Goods Orders, Jackson Hole US Dollar Index eyes to regain 109.00 ahead of US Durable Goods Orders, Jackson Hole

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US Dollar add another tailwind with strong jobs data on Thursday – Crypto News

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  • The US Dollar keeps pressing after upbeat ISM on Wednesday and strong job data on Thursday.
  • Surprise rate cuts out of Poland make the ECB, BoE weaker against Fed.
  • The US Dollar Index breaks above 105 but takes a small step back on Thursday.

The US Dollar (USD) is popping higher yet again after resilient jobs data on Thursday. Equites are taking another nosedive move with the S&P 500 breaking below the 55-day Simple Moving Average (SMA) and the volatility index (VIX) pushing higher. With the surprise 0.75% rate cut from the Polish Central Bank, analysts are further increasing the rate divergence trade where US rates will remain elevated for longer and Europe, the United Kingdom and Central European countries will have to cut quicker and more aggressively in order to avoid a crashing economy. 

The macroeconomic data coming in this Thursday is further confirming the above statement with Nonfarm payrolls popping up 3.5%, from 3.7% previous where 3.4% was expected. Additional oil on the fire comes from the Initital Jobless Claims number that drops from 228k to 216k, where an uptick to 324k was expected. Markets will be on edge to hear from five different US Federal Reserve officials to hear what they have to say about the current market conditions. 

Daily digest: US Dollar is no match for G20

  • As if the US is in a universe on its own. Another batch of data confirming strong economic health in the US where a soft landing grows as a possibility by the day. The Initial Jobless Claims numbers at 12:30 GMT were a drop from 228k to 216k. The Continuing Claims went from 1,725k to 1,679k. In both measures an uprising was expected. Add the steady Nonfarm Productivity for Q2 from 3.7% to 3.5%, beating the 3.4% estimate and it looks like the US is set to outpace Europe and other economies once again. 
  • A chunky batch of US Federal Reserve speakers: Patrick Harkers from Philadelphia is to kick off the headlines at 14:00 GMT. Next Fed member Austan Gooldsbee from Chicago will speak at 15:45 GMT. At 19:30 GMT, John Williams from New York will speak together with Raphael Bostic from Atlanta. Michelle Bowman will deliver the last remarks from Fed members this Thursday around 20:55 GMT. 
  • Equities in Asia are taking over the negative mood in which the US closed on Wednesday: The  Hang Seng Index has fallen over 1% near its closing bell on Thursday. Meanwhile, European equities are firmly in the red but containing losses. 
  • The CME Group FedWatch Tool shows that markets are pricing in a 93% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. 
  • The benchmark 10-year US Treasury bond yield trades at 4.29% and keeps heading higher after the US Treasury issued quite a lot of debt paper on Tuesday. The auctions flooded the markets with supply and saw yields ramping up. 

US Dollar Index technical analysis: US in another universe

Taking a step back to the recent turn of events, it becomes clear that this week has already been a seismic shift from this year’s monetary policy for several big central banks. The clear shift in stance can be witnessed with the US Federal Reserve and the Bank Of Canada sticking to the higher for longer timeline concerning interest rates, while Poland and the European Central Bank are seeing EU data signaling distress. This only adds to more fuel in the rate divergence between the two big geographical blocks. Expect to see more gains in the US Dollar Index (DXY) in the fall once the ECB and other Central-European countries start to cut, while the Fed keeps rates steady throughout 2023.

All eyes stay on 105.00 after the DXY briefly broke the level on Wednesday. Only a few cents to go and the DXY will be at a new six-month high. The next levels are at 105.88, the high of March 2023, which would make a new yearly high. If the index reaches this last level, some resistance might kick in. 

On the downside, the 104.30 figure is vital to keep the US Dollar Index sustained at these elevated levels. Some room lower, the 200-day Simple Moving Average (SMA) at 103.06 comes into play, which could bring substantially more weakness once the DXY starts trading below it. The double belt of support at 102.42, with both the 100-day and the 55-day SMA, are the last lines of defence before the US Dollar sees substantial and longer-term depreciation. 

 

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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