The Dollar remains stable awaiting the US employment report.

• The US dollar is expected to remain quite dovish at the start of Friday.
• Non-farm payrolls and the US ISM manufacturing will be the talk.
• The Dollar Index is off its weekly low, although any headwinds could disrupt the Dollar’s summer rally.

He dollar (USD) is at a turning point as the scales have rebalanced after a volatile week in which data has whipped the dollar back and forth. Traders looking back to assess the possible outcome at the end of this Friday will have seen that Wednesday’s data with JOLTS and GDP missing estimates tipped the balance in favor of a weaker US dollar and deeper rate cuts. the US Federal Reserve. The balance tipped completely the other way on Thursday, when the Fed’s preferred inflation gauge – the core Personal Consumption Expenditures (PCE) index – showed that inflationary forces are still present.

With the release of the August Non-Farm Payrolls (NFP) and manufacturing figures from the Institute for Supply Management (ISM), traders will have a clear idea of ​​where the balance will tip at the end of this eventful week. The change in the NFP will be the crucial factor, and expectations are that it will land somewhere between 120,000 and 230,000. Anything below 120,000 will be seen as contraction and thus raise bets for a faster rate cut and consequently a weaker dollar. If the figure exceeds 230,000, the labor market will be considered tight, which would confirm the Fed’s stance not to cut interest rates in the short term. This would translate into a stronger dollar.

Daily Roundup: Dollar Faces Crunch Time

• The US employment report consists of several key components. Here are the ones you need to watch out for at 12:30 GMT: The change in the NFP is expected to be from the previous figure of 187,000 to 170,000. The average monthly change in hourly earnings is expected to slow a bit, from 0.4% to 0.3%. The headline unemployment rate is expected to hold steady at 3.5%.
• The S&P Global Manufacturing Purchasing Managers’ Index (PMI) for August will be released around 13:45 GMT. It is expected to remain unchanged at 47, which means that the contractionary trend continues.
• Final confirmation of the above move behind US Non-Farm Payrolls will come from the ISM Manufacturing PMI for August, which is expected to rise from 46.4 to 47 points. This supposes a continuation of the contraction. The Employment Index is expected to hold steady at 44.4 to 44.2 for the next month. The index of new orders would go from 47.3 to 46.3, and the index of prices paid from 42.6 to 43.9 points.
• Equity markets are seeing a similar picture to Thursday, with Japan’s Topix Index closing at +0.76%. Hong Kong’s Hang Seng is down 0.5%. European and US stocks are up slightly but looking for direction.
• CME Group’s FedWatch tool shows that markets are pricing in an 89% chance that the Federal Reserve will keep interest rates unchanged at its September meeting. The previous probability of 78% was quickly reassessed following the pessimistic data from the JOLTS report.
• The 10-year US Treasury yield is trading at 4.10% and has stopped its slide from earlier this week.

Dollar Index Technical Analysis: Left or Right

The dollar is not expected to make a move until this Friday’s main event: the August NFPs. A very tight range is expected, possibly with a slight shade of US dollar weakness sparked by a handful of traders trying to pre-position NFPs to be weaker. This is because earlier this week the ADP private payrolls figure was also weaker. The support at 103 is there and will either trigger another bounce or break out and see the Dollar Index fall for the next few weeks.

On the upside, 103.74, the high of August 31, comes into play as the level to beat to stop this recession. Once that level is broken and consolidated, we will have to wait until 104.00, where 104.35 (29 Aug high) is an ideal candidate for a double top. In case the dollar continues to rise, we will have to wait until 104.47, the maximum of the last six months.

To the downside, the DXY summer rally is about to break as only one item supports the dollar. This is the 200-day SMA, and could signify further weakness once the DXY starts trading below it. The double belt support at 102.38 with the 100-day SMA and the 55-day SMA are the last lines of defense before the US dollar suffers a longer-term and substantial devaluation.