The US Dollar Index (DXY) remained under pressure on Friday morning as the odds that the Federal Reserve will cut interest rates rose following a series of weak jobs numbers. It was trading at $98, down from last month’s high of $100.4
US NFP data ahead
The US Dollar Index slipped a bit after the Bureau of Labor Statistics published relatively weak jobs numbers this week. Its report on Wednesday showed that the number job vacancies dropped sharply in July.
Another report on Thursday revealed that the number of Americans filing for unemployment benefits jumped last week. They rose by 8,000 to 237,000 in the week ending on August 30, higher than the median estimate of 230,000.
Most importantly, a report by ADP revealed that the private sector added just 54,000 jobs in August, also lower than the median estimate of 68,000.
These numbers confirm that companies have become hesitant to hire as the cost of doing business rose before Donald Trump’s tariffs on all imports. Indeed, recent numbers show that the average payroll growth in the last 6 months was the lowest since the pandemic.
The next important catalyst for the DXY Index will be the upcoming non-farm payrolls data on Friday. Economists expect the data to show that the economy created 75,000 jobs, slightly higher than the 73,000 it created in July.
Based on the recent numbers, odds are that the BLS will downgrade the number of jobs created in July.
Therefore, these numbers mean that the Federal Reserve will deliver its first interest rate cut of the year in this month’s meeting. In this, the bank may decide to cut rates by 25 basis points to between 4% and 4.25%.
Odds of a rate cut have jumped sharply in the past few weeks following Powell’s speech at the Jackson Hole. Other Fed officials, especially Christopher Walls, have campaigned for rate cuts pointing to the labor market.
The US Dollar Index has also reacted to the new developments at the Federal Reserve, where Donald Trump is attempting to fire Lisa Cook, a governor appointed by Jerome Powell. He has accused her of mortgage fraud, an allegation she has denied.
These developments have helped to drive other assets upwards. For example, gold price has jumped to a record high, while silver has climbed to $40 for the first time since 2011.
US Dollar Index price analysis
The daily timeframe chart shows that the DXY Index has pulled back in the past few months, moving from a high of $110 in January to $98 today.
It has moved below the 50-day Exponential Moving Average (EMA) and the key level at $100.14, the highest swing on July 31, and also the lowest swing in September last year.
Therefore, the most likely scenario is where the index continues falling as sellers target the key support level at $96.32, the lowest swing in July this year. A move above the key resistance at $100 will invalidate the bearish outlook.
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