US Dollar retreats after strong ADP, missing GDP


  • The US Dollar turned lower after Wall Street's opening, DXY holds above 104.00. 
  • US GDP grew below expectations in the third quarter but still at a pace consistent with a strong economy.
  • The pair remains moving sideways with 104.55 resistance limiting rallies 

The US Dollar Index (DXY) has moved back and forth during Wednesday’s European session. A better-than-expected US ADP Employment Report has eased labor market concerns triggered by weak job openings and improved investors' expectations for Friday's Nonfarm Payrolls numbers.

Apart from that, the Gross Domestic Product (GDP) confirmed that the US economy advances at a faster pace than the rest of the major economies, with Personal Consumption Expenditures growing at strong levels. These data are consistent with steady inflation pressures, that force the Federal Reserve (Fed) to remain cautious with rate cuts. The US Dollar initially appreciated with the news, but gave up after a better-than-anticipated Wall Street's performance in the first hour or trading. 

Daily digest market movers: The US Dollar shows signs of weakness ahead of key US releases

  • US ADP Employment has shown a 233K increase on private-sector payrolls in October beating expectations of a 115K increase. In the same report, September's reading has been revised up to a 159K increase, from the 143K reported last month.
     
  • The Q3 US Gross Domestic Product revealed that the economy grew at a 2.8% pace. These figures fall short of the 3% growth foreseen by the markets but it is comparatively strong in a global context of economic slowdown.
     
  • On Tuesday, the JOLTS report showed a decline to 7.44 million Job Openings in  September, its weakest reading in more than three years. These figures raised concerns about a significant deterioration of the labour market and increased pressure on the US Dollar.
     
  • Futures markets are now nearly fully pricing in a quarter-point interest-rate cut by the Fed at its meeting next week, according to data from the CME Group’s FedWatch tool. The chances of another 25 bps cut in December have eased to 70% from 76.6% before the data release.
     
  • On Thursday, the Personal Consumption Expenditures (PCE) Prices Index, The Fed’s inflation data of choice, is expected to show that price pressures continue to ease, with the core reading down to 2.6% yearly from 2.7% in September.
     
  • The highlight of the week will be Friday’s NFP report, which is expected to show a significant decline in new payrolls. Such an outcome might hurt speculative demand on the US Dollar.
  • DXY technical outlook: Approaching the 104.00 mark

The DXY index gave back intraday gains an approaches its intraday low at 103.98. It is still holding within familiar levels and confined to tight intraday ranges, somehow highlithing the cautious stance that rules financial boards. 

The 4-hour Relative Strength Index (RSI) indicator signals a potential bearish continuation, given that it accelerated its slide below its 50 level, currently at around 43. At the same time, sellers continue to reject advances around a flat 20 Simple Moving Average (SMA). The Dollar Index needs to break below Friday's low at 103.95 to confirm a deeper correction and shift its focus towards 103.40. Resistances are at the 104.55 - 104.75 area and 105.20.

 

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews ​and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

Next release: Fri Nov 01, 2024 12:30

Frequency: Monthly

Consensus: 115K

Previous: 254K

Source: US Bureau of Labor Statistics

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD holds above 1.0850 after EU inflation data

EUR/USD holds above 1.0850 after EU inflation data

EUR/USD trades marginally higher on the day above 1.0850 in the European session on Thursday. The data from the Eurozone showed that the annual HICP inflation rose to 2% in October from 1.7% in September, helping the Euro hold its ground.

EUR/USD News
USD/JPY falls below 152.50 as markets assess BoJ policy decisions

USD/JPY falls below 152.50 as markets assess BoJ policy decisions

USD/JPY stays under bearish pressure and trades below 152.50 on Thursday. The Bank of Japan (BoJ) left its policy setting unchanged but Governor Ueda noted that the impact of foreign exchange rate on prices had become larger than in the past.

USD/JPY News
Gold holds near $2,780, looks to US PCE Price Index for fresh impetus

Gold holds near $2,780, looks to US PCE Price Index for fresh impetus

Gold stays in a consolidation phase after setting a new record-high of $2,790. US political jitters and Middle East tensions might continue to act as a tailwind for the XAU/USD. Traders keenly await the release of the US PCE Price Index before placing fresh directional bets.

Gold News
Uniswap Price Forecast: Technical outlook suggests a bullish breakout ahead

Uniswap Price Forecast: Technical outlook suggests a bullish breakout ahead

Uniswap is trading slightly below $8 on Thursday after rejecting a key resistance level on Wednesday. A successful close above this threshold could indicate a rally for the decentralized exchange, bolstered by technical indicators showing a bullish crossover pointing to potential upward momentum.

Read more
German economy surprises in the third quarter

German economy surprises in the third quarter

The German economy avoided a technical recession in the third quarter, showing unexpected growth. However, this does not change the fact that the economy remains stuck in stagnation.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures