Ahead of Employment Data, US Dollar Strengthens

Key Insights:

• The US Dollar gained strength against other currencies as rising bond yields supported the demand for the US currency.
• Economists are expecting the release of nonfarm payrolls, average hourly earnings, unemployment rate, and the minutes of the Federal Reserve’s December meeting.

The US dollar started trading at 102.10, which is a notable rise. This move may be attributed to investors seeking the safety of the US currency ahead of key economic reports due out this week. In its last meeting in 2023, the Fed maintained a dovish stance. It also noted that it was not planning on raising rates in 2024.

Although an expected 75 basis point rate cut is still in the cards, the actions that will be taken next will depend on the incoming data, such as the labor reports in December. Market participants see a small chance of a rate reduction in January, which could limit the US dollar’s gains.

The RSI indicator shows an encouraging outlook as it traverses a positive slope in unfavorable territory. This indicates that the index may be poised for a potential reversal after experiencing significant oversold conditions.

The MACD’s depiction of green bars in the bullish trend continues to reinforce this image. This suggests that the upmove continues in the short term.

The index is currently trading below the 200, 100, and 20 SMAs. This suggests that it is under pressure. Conversely, the bullish signals of the MACD and RSI are being overshadowed by the bearish elements of the market.