US Dollar Recovers Following Sharp Rise in Non-Farm Payrolls

• The US dollar recovers across the board.
• Markets are closing down any hope of a Fed rate cut in June or July, even September is doubtful.
• The US Dollar Index (DXY) moves away from the lower level of 104.00 and recovers.

He US dollar (USD) recovers thanks to the surprise increase in the number of Non-Farm Payrolls, which reached 272,000, surpassing economists’ highest estimate of 258,000. In recent days, hopes for a rate cut by the US Federal Reserve were starting to rise for September, although that possibility is expected to be off the table now. The question now will be whether there will be a cut in 2024, since these numbers do not allow or require the Fed to cut.

On the economic front, all the data is now available and the markets can begin to digest the numbers. Federal Reserve Governor Lisa Cook is still making an appearance, giving a speech at the 2024 Girls’ Global Academy Graduation Ceremony at the University of the District of Columbia in Washington, D.C. Although her speech is not expected to contain information on monetary policy.

Daily Market Moves: Caught on the Wrong Side

• At 12:30 GMT, the US employment report for May was released:
  • Non-Farm Payrolls increased from 185,000 in April to 272,000 in May. The fact that the previous 185,000 was revised downward to 165,000 makes this number even higher.
  • Monthly average hourly earnings rose to 0.4% in May from 0.2% the previous month.
  • Average annual hourly earnings increased from 3.9% to 4.1%.
  • The unemployment rate rose slightly, from 3.9% to 4%.
• European stocks are getting hammered by the release of the US Employment Report, while US stocks are still looking for direction.
• According to the CME Fedwatch tool, 30-day Fed Funds futures price data suggests a 31.8% chance of keeping rates unchanged in September, versus a 55.7% chance of a rate cut. rates of 25 basis points (bps) and a 12.3% probability of a rate cut of even 50 bps. By the next meeting on June 12, markets are fully pricing in rates to remain at current levels.
• The benchmark 10-year US Treasury bond yield is trading around 4.41%, and rising substantially, erasing hopes of a quick rate cut by the Fed.

US Dollar Index DXY Technical Analysis: Next Week’s CPI Already Discounted

The US Dollar Index DXY is flirting with a drop below the 104.00 area. There have already been some brief forays below this level in recent days, although for now, this area is still seeing a lot of buying interest. The question is how long those buyers will last, and if the NFP comes in below the weaker projection, something could break.

To the upside, DXY first faces confluence resistance at the 200-day SMA and 100-day SMA at 104.44. Higher up, the pivotal level near 104.60 comes into play. For now, the top can be seen around 105.00, with the 55-day SMA coinciding with this round number and the last weeks peak at 105.08.

On the downside, the big figure of 104.00 seems to be holding. Once above that level, another decline to 103.50 and even 103.00 are the levels to watch. With the RSI not yet oversold, further declines are still under consideration.