- The US Dollar turns a touch softer with Challenger Job Cuts ticking up ahead of Friday’s NFP.
- Fed Chairman Jerome Powell warned the US debt is on an unsustainable path.
- The US Dollar Index (DXY) failed to close above the pivotal 106.50 level and eases further.
The US Dollar (USD) trades softer this Thursday as the Greek tragedy of the French political scene unravels further. With the French government led by Prime Minister Michel Barnier out of the way, French President Emmanuel Macron begins the search for a new prime minister. In the US side, Federal Reserve (Fed) Chairman Jerome Powell warned that the US debt is on an unsustainable path and needs to be addressed.
On the economic data front, a calmer calendar is ahead compared to that of the past few days. the main elements will be the weekly Jobless Claims and the Challenger Job Cuts for November, as well as the Trade Balance data. Employment-related data could be important ahead of the Nonfarm Payrolls print on Friday.
Daily digest market movers: Job Cuts tick up
- The Challenger Job Cuts report for November came in more bearish than the October one. The November number came in at 57,727.00 layoffs against the 55,597.00 layoffs seen in October.
- Paul Atkins has been nominated to become the Chair of the US Securities and Exchange Commission (SEC) by President-elect Donald Trump. Bitcoin (BTC) got fired up on the back of that news and broke above $100,000 for the first time. Paul Atkins is known for being a Bitcoin enthusiast.
- Weekly Jobless Claims data for the week ending November 29 is expected around 13:30 GMT. Expectations are for a small uptick to 215,000 from 213,000 last week.
- Equities trade very mixed this Thursday. Despite the French political turmoil, European stocks are up near 0.50%. US Futures are still looking for direction, trading flat ahead of the US Opening Bell.
- The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 74.0%. A 26.0% chance is for rates to remain unchanged. The Fed Minutes and recent comments from several Fed officials have helped the rate cut odds for December to move higher.
- The US 10-year benchmark rate trades at 4.21%, roughly in the middle of this week’s range between 4.16% and 4.28%.
Economic Indicator
Initial Jobless Claims
The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.
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Next release: Thu Dec 05, 2024 13:30
Frequency: Weekly
Consensus: 215K
Previous: 213K
Source: US Department of Labor
US Dollar Index Technical Analysis: Softer into NFP Friday
The US Dollar Index (DXY) is turning into a snooze fest, not set to wake up before the US Jobs report on Friday. With some lighter US data, only headline risk could take place in an otherwise calm Thursday. With the tight range in the US Dollar Index, the nearby levels at 106.52 and 105.53 remain pivotal to watch.
On the upside, 106.52 (April 16 high) still remains the first resistance to look at after failing to close above it this week after several attempts. Should the US Dollar bulls reclaim that level, 107.00 (round level) and 107.35 (October 3, 2023, high) are back on target for a retest.
Looking down, the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation.
US Dollar Index: Daily Chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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