DXY testing 100.00 resistanceThe US dollar index has risen to rest a key resistance area around the 100.00 level. Previously a key support and resistance zone, what happens here could determine the near-term technical direction for the US dollar.
Key support below this zone is at 98.95, marking a prior resistance. Given the short-term bullish price structure, I would expect this level to hold if the greenback were to ease back from here.
If the bullish momentum gathers pace, then 101.00 could be the next stop, followed by the recent high of 101.97.
From a macro point of view, resilient economic data and persistent core inflation concerns continue to support the Federal Reserve’s cautious policy approach. Today’s core PCE inflation reading came in slightly above forecast, at 2.8% year-over-year versus the expected 2.7%. In addition, jobless claims were better than anticipated, registering 218,000 compared to the 224,000 forecast. The Q2 Employment Cost Index also surprised to the upside, rising 0.9% quarter-on-quarter.
These figures follow yesterday’s stronger-than-expected GDP report and a solid ADP private payrolls release, further underscoring the strength of the U.S. economy.
Attention now turns to Friday’s nonfarm payrolls report, which could have a meaningful impact on rate expectations. Fed Chair Jerome Powell has emphasized the importance of the unemployment rate as a key metric, so any upside surprise could reinforce the Fed’s current position.
However, expectations are not very high for the non-farm payrolls report. Current forecasts suggest an increase of 106,000 jobs, with average weekly earnings rising 0.3% month-over-month, and the unemployment rate edging up to 4.2%. Yet, the scarcity of strong leading indicators this month adds a layer of uncertainty to the outlook.
By Fawad Razaqzada, market analyst with FOREX.com
