Forex News

USD Index Faces Downward Pressure Ahead of Jobs Report

Published by
Nonhlanhla P Dube
  • The USD Index has resumed its downward trend and is currently trading near the 101.00 mark ahead of the non-farm payrolls data release.
  • The Federal Reserve’s recent indication that it may pause its normalization process in the near future is putting downward pressure on the index.
  • The upcoming US jobs report will be crucial for the future direction of the index, as the Federal Reserve has emphasized that its decisions on future interest rates will be data-dependent.

The USD Index has continued to remain under pressure near the 101.00 mark ahead of the non-farm payrolls data release, as the greenback resumes its downward trend towards the low-101.00s. The USD Index, which measures the performance of the US dollar against a basket of other major currencies, appears to have struggled to maintain Thursday’s gains and has returned to the negative territory, remaining in the lower end of its recent range. Despite this, the index has been supported by the 101.00 zone, for the time being.

Investors are still processing the recent Federal Open Market Committee (FOMC) event, which took place on Wednesday, and the increasing possibility that the Federal Reserve may pause its hiking cycle as soon as at the next meeting in June. The US jobs report, due to be released later in the North American session, will be crucial for the index, as the Federal Reserve has emphasized that its decisions on future interest rates will be dependent on data. This was highlighted by Chief Powell during the recent FOMC event.

The USD Index is currently trading close to the 101.00 zone, as investors assess the outcome of the last FOMC event. However, the index seems to be facing downward pressure due to the Federal Reserve’s recent indication that it may pause its normalization process in the near future. The future direction of monetary policy will be determined by the performance of key fundamentals, mainly employment, and prices.

In favour of a Federal Reserve pause is the ongoing disinflation, despite consumer prices remaining above the target. In addition, there has been a nascent easing in the labour market, amidst steady speculation of a possible recession.

Key events in the US this week include the nonfarm payrolls data release, unemployment rate, and consumer credit change. These events will provide investors with insight into the state of the US economy, which will be important for the future direction of the USD Index.

Relevant issues for the US and South Africa include the ongoing debate over a soft/hard landing of the US economy, the terminal interest rate near the peak versus speculation of rate cuts in 2024, the Federal Reserve’s pivot, and geopolitical effervescence versus Russia and China. The US-China trade conflict is also a significant issue that may impact the USD Index in the future.

Currently, the USD Index is losing 0.21% at 101.24, facing initial contention at 101.01, which is the weekly low from April 26, prior to 100.78, which is 2023 low from April 14, and finally 100.00, which is a psychological level. On the other hand, the break above 102.40, which is the monthly high from May 2, would open the door to 102.80, which is the weekly high from April 10, and then 103.05, which is the monthly high from April 3.

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube

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