USD Softer on Monday
The US Dollar is starting the week on a softer footing as fears over a potential US government shutdown loom this week. If the government fails to agree a new funding deal before the fiscal year ends tomorrow, leading to parts of the federal government closing on Wednesday. If seen, this will be firmly bearish for USD and could impact the release of Friday’s NFP data. Depending on the duration of the shutdown, the Fed’s easing cycle could become much harder to project, creating deeper cross-market volatility. However, if a last-minute deal can be agreed and a shutdown avoided, this should fuel a rebound in USD ahead of Friday’s data.
NFP Forecasts
Looking ahead to the labour market reports on Friday then. The market is expecting the headline NFP figure at 51k, up from 22k prior. Earnings and the unemployment rate are expected unchanged at 0.3% and 4.3% respectively. If data prints in line with forecasts, his should keep October easing prospects healthy, with jobs growth still at very weak levels. In this scenario, USD should weaken again into the following week as traders brace for a furtehr Fed rate cut in October. Given the built-up level of dovish expectations, it would likely take a heavy upside surprise (+100k) to cause any shift higher in USD on the back of the data.
Technical Views
DXY
The index has turn back below the 98.24 level, failing just ahead of a retest of the broken bull channel lows and the bear channel highs. While these key resistance levels hold, focus is on a fresh push lower with 96.63 support the first objective for bears ahead of the deeper 94.85 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.