- The US Dollar consolidates near the highs with the overall bullish trend losing strength.
- US consumer confidence and JOLTS job openings data will determine the direction of the USD on Tuesday.
- A bearish engulfing candle on Monday and a bearish divergence warn of an upcoming correction.
The US Dollar is moving sideways below two-month highs near 0.8700. The pair is buoyed by broad-based USD strength, although the overall uptrend is losing momentum.
Recent strong US data, which has crushed hopes of further major cuts by the Fed and rising hopes that Trump will win a second term next week, are underpinning US Dollar strength.
The market expects a series of key data releases this week, starting with US consumer confidence and JOLTS job openings data, due out later on Tuesday.
The technical picture shows that the uptrend is losing momentum. The bearish engulfing candle printed on Monday is a negative signal and the bearish divergence on the 4-hour RSI points in the same direction.
Support at 0.8645 is holding the bears back for now. Below this level, the next targets are 0.8615 and 0.8555. The resistances are 0.8700 and 0.8745.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and, therefore, a key factor in the valuation of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and therefore economic growth, boosting the value of the local currency. On the other hand, a very tight labor market – a situation in which there is a shortage of workers to fill vacant positions – can also have implications on inflation levels and, therefore, on monetary policy, since a supply of labor Low labor and high demand lead to higher wages.
The pace at which wages grow in an economy is key for policymakers. High wage growth means that households have more money to spend, which often translates into higher prices for consumer goods. Unlike more volatile sources of inflation, such as energy prices, wage growth is considered a key component of underlying and persistent inflation, as wage increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding their monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks have mandates explicitly related to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to keep inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for authorities given their importance as an indicator of the health of the economy and their 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.
