- The US DXY dollar index is recovered after employment data that surprises up, doubting anticipated rates cuts by the Fed.
- Non -agricultural payrolls of the US increase by 147K in June, overcoming analysts’ estimates, and unemployment rate decreases unexpectedly to 4.1%.
- The DXY quotes above 97.00, with Momentum indicators that reflect an increase in upward optimism.
The dollar (DXY) index is trying to recover in the American session on Thursday, after the last publication data publication of the US, which highlighted a resistant labor market.
At the time of writing, a rebound in yields has led to an increase in the US dollar (USD) compared to its main currency pairs, pushing the DXY above the level of 97.00.
The market approach has been in the Non -agricultural payrolls (NFP), which serve as a barometer of economic growth and have a direct impact on monetary policy, particularly at a time when the US Federal Reserve (Fed) adheres to a data -dependent approach to determine interest rates.
Positive Non -Agricultural Payroll Report It promotes US yields, elevates DXY
The non -agricultural payroll report was expected to show that the US economy added 110k jobs in June, after an increase of 144K in the previous month.
However, the main number was printed in 147K, exceeding estimates. The unemployment rate fell to 4.1%from 4.2%, while economists had projected that it would increase to 4.3%.
Initial unemployment applications numbers also decreased, relieving concerns about labor market and reducing the potential of a feature cut in July.
Before the publication of the June employment data, the CME Fedwatch tool indicated that the markets were valuing a 25.3% probability of a 25 basic points (PBS) cut in July.
These numbers have been significantly reduced, with the markets now valuing a mere probability of 4.7% of a cut in July.
Higher interest rates perspectives make US yields more attractive, increasing demand for the US dollar.
The DXY jumps over 97.00, before stabilizing with the RSI by retreating to neutral territory
Since January, the US dollar has continued to weaken, pushing the DXY to a minimum of three and a half years this week.
As the DXY recovers, the psychological level of 97.00 now serves as a short -term resistance. With support in the simple mobile average (SMA) of 20 periods in 96.83.
4 -hour graph of the dollar index (DXY)
A rupture of this level could open the door for a possible re-provoking of the minimum of the year of 96.38 that was established on Tuesday.
Meanwhile, if the upward trend manages to win traction above the 50 periods SMA in 97.33, the Fibonacci recoil level of 23.6% of the fall from May to July could come into play at 97.70.
Above that, there is the psychological level of 98.00 and the FIBO level of 38.2% in 98.52.
The relative force index (RSI) in the four -hour graph is approaching 57, reflecting an increase in the bullish momentum without entering over overcompra territory.
EMPLOYMENT – FREQUENT QUESTIONS
The conditions of the labor market are a key element to evaluate the health of an economy and, therefore, a key factor for the assessment of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and, therefore, for economic growth, which drives the value of the local currency. On the other hand, a very adjusted labor market – a situation in which there is a shortage of workers to cover vacancies – can also have implications in inflation levels and, therefore, in monetary policy, since a low labor supply and high demand lead to higher wages.
The rhythm to which salaries grow in an economy is key to political leaders. A high salary growth means that households have more money to spend, which usually translates into increases in consumer goods. Unlike other more volatile inflation sources, such as energy prices, salary growth is considered a key component of the underlying and persistent inflation, since it is unlikely that salary increases will fall apart. Central banks around the world pay close attention to salary growth data when deciding their monetary policy.
The weight that each central bank assigns to the conditions of the labor market depends on its objectives. Some central banks have explicitly related mandates to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the double mandate to promote maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to maintain inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for the authorities given its importance as an indicator of the health of the economy and its direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
