US Dollar near weekly low ahead of NFP release – Crypto News – Crypto News
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US Dollar near weekly low ahead of NFP release – Crypto News

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11 months ago

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  • The US Dollar is set to end its worst week in over one year.  
  • Traders have devalued the Greenback further ahead of the US employment report. 
  • The US Dollar Index faces devastation and devalues over 3.5% so far this week. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is undergoing a harsh devaluation, losing over 3.5% since Monday and trading near 103.70 at the time of writing on Friday. The Greenback is undergoing a regime shift where the US Dollar is no longer in the graces of traders. The interest rate differential between the Federal Reserve (Fed) and other central banks is set to narrow after Fed Governor Christopher Waller said on Thursday that there might be two to three rate cuts this year. 

On the economic data front, all eyes are on the Nonfarm Payrolls release this Friday. Expectations are for 160,000 jobs gained in February, though the analysts’ range could not be wider, with a small 30,000 on the low estimate and the high estimate at 300,000. That means that any print towards 30,000 or even negative could mean another severe leg lower for the Greenback. 

Daily digest market movers: Broad range

  • At 13:30 GMT, the US employment report for February is due:
    • The Nonfarm Payrolls are expected to come in at 160,000 against the previous 143,000 reading from January.
    • The Average Hourly Earnings month-on-month are set to soften to 0.3% against 0.5%. 
    • The Unemployment Rate should remain steady at 4%.
  • At 15:15 GMT, Fed Governor Michelle W. Bowman discusses “Monetary Policy Transmission Post-COVID” at The University of Chicago Booth School of Business 2025 US Monetary Policy Forum in New York.
  • At 15:45 GMT, Federal Reserve Bank of New York President John Williams participates in a discussion of the US Monetary Policy Forum Report titled “Monetary Policy Transmission Post-Covid” at the University of Chicago Booth School of Business in Chicago, Illinois.
  • At 17:20 GMT,  Fed Governor Adriana Kugler speaks on ‘The Rebalancing of Labor Markets Across the World’ at the Bank of Portugal’s Conference on Monetary Policy Transmission and the Labor Market in Lisbon, Portugal.
  • At 17:30 GMT, Fed Chair Jerome Powell delivers a speech on the economic outlook at The University of Chicago Booth School of Business 2025 U.S. Monetary Policy Forum in New York.
  • At 18:00 GMT, Fed Governor Adriana Kugler delivers a speech on the economic outlook at the University of Chicago Booth School of Business 2025 U.S. Monetary Policy Forum, in New York.
  • Equities look very split this Friday with European indices in the red while US futures are marginally in the green. 
  • After recent US economic data and Fed policymakers’ comments, the CME Fedwatch Tool projects a 46.8% chance of an interest rate cut in the May meeting compared to a 33.3% probability one week ago. 
  • The US 10-year yield trades around 4.25%, off its near five-month low of 4.10% printed on Tuesday.

US Dollar Index Technical Analysis: Final straw

The US Dollar Index (DXY) is facing a chunky loss this week, with over 3.5% in the red at the time of writing on Friday. The question is whether the Nonfarm Payrolls report can push back and deliver some relief on these losses. However, markets will want to see if the Department of Government Efficiency (DOGE) effect is already impacting the unemployment rate and the change in the Nonfarm Payrolls going forward. 

With this week’s sharp decline, the 104.00 round level is being broken at the time of writing on Friday and looks unfit to see a return soon. Further up,  the first upside target is to recover the 105.00 round level and the 200-day Simple Moving Average (SMA) at 105.03. Once that zone has been recovered, several near-term resistances are lined up, with 105.53 and 105.89 identified as two heavy pivotal levels before breaking back above 106.00.

On the downside, the  103.00 round level could be considered a bearish target in case US yields roll off again, with even 101.90 not unthinkable if markets further capitulate on their long-term US Dollar holdings. 

US Dollar Index: Daily Chart

Employment FAQs

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

 

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