The greenback has faced consistent outflows in the period of the last 4 weeks and despite the downward pressures, the dollar index seeks to form a base near the 98 mark, near 2-month lows. Investors are now bracing for the release of the November non-farm payrolls data, to update their forecasts for future rate cuts.

October’s report has been postponed multiple times and may never get released, since agencies collecting the data were inactive during the longest US government shutdown, leaving participants guessing the state of the labour market, having only the data from ADP and JOLTS available to be fed in their forecasting models.

Today’s NFP print is expected to showcase that the US economy managed to add 40k new jobs in the month of November, significantly lower than the “normal” 200k average, indicating that the US labour market’s employment growth remains elusive and brittle. The unemployment rate is expected to uptick by a tenth of a percentage point, to the 4.5% for yet another month, confirming the worries for a slowdown. As for average hourly earnings, a tenth of a percent rise is expected on a monthly basis.

Should the actual result match forecasts, we may see the greenback facing further outflows and gold to head higher, due to the inverse correlation it has with it. Furthermore, should the NFP print showcase a number less than 40k (and in the extreme case, a negative print) we shall reasonably expect to see strong outflows in the greenback and its counterparts capitalizing on its weakness and rally further. At the same time, odds for rate reductions in future Fed meetings are reasonably expected to grow, which could benefit equities and spark inflows.

On the other hand, a stronger than expected NFP number could downplay the probabilities for inbound cuts and forced the Federal Reserve to deploy policy easing measures in much more hesitant manner. Under this scenario, the greenback is expected to rebound and safe haven assets such as gold, see outflows and pull further away from its record highs.

Technical Analysis

DXY Chart – Weak job growth expectations keep the USD near 2-month lows

Resistance: 98.20 (R1), 100 (R2), 101.20 (R3)
Support: 97.20 (S1), 96.00 (S2), 94.70 (S3)