The Dollar Index (DXY) has indeed dipped below its technical support level, now trading beneath 97.5. Weak US economic data expected this week could drive it downward, benefiting commodities like gold and oil. Traders should keenly observe market momentum before engaging in trades.
Contents
Fundamental Analysis
Non-Farm Payrolls (NFP) Explained
- NFP: This figure tracks new jobs created in the US, excluding farmhands, military personnel, and small non-profit employees.
- Release: It’s typically published alongside unemployment rates and average hourly earnings.
- Purpose: It gauges the US labour market. The Federal Reserve relies on this data for interest rate decisions. Interest rates, in turn, affect the USD and indirectly influence gold, oil, and forex pairs.
This Week’s NFP Forecast (Released July 3)
- Jobs: Expected between 110K and 120K, which is below the previous month’s 139K.
- Unemployment Rate: Anticipated to tick up slightly to 4.3%.
- Wages: Average hourly earnings are projected to rise by 0.3% from the previous 0.4%.
Main Scenario
Should the data fall short of forecasts, it suggests a slowing US economy. The Federal Reserve might ease rates sooner. A lower rate often leads to a weaker USD, prompting investors to seek higher yields elsewhere.
Technical Analysis
US Dollar
The Dollar Index has breached its 97.5 – 98 support and seems poised to continue its downward slide, possibly reaching the 95 support level. In such a scenario, typically, gold and oil rise, while the USD weakens.
Gold (XAUUSD)
Gold finds support at the Fibonacci 0.618 level around $3249. A weakening USD could push gold higher to around 3450. However, the RSI indicates weak bullish momentum. Traders should wait for momentum confirmation before making moves, as gold might not hold its current level.
Oil (USOIL)
Oil remains in a tight range around the $64 mark. With no major updates from OPEC or geopolitical developments, a breakout seems distant. If NFP data is weak and USD declines, oil might maintain its $64 support, leading to minor recoveries. Traders should stay attuned to OPEC announcements and tensions in the Middle East as oil prices are highly sensitive to political shifts.
Notes
Even if NFP data falls short, market reactions might be subdued due to:
- Pre-existing market expectations.
- Upcoming pivotal data like . This measures US service sector health, crucial for market direction.
Gold and oil, currently at support levels, lack strong momentum – wait for definitive trading signals.
Strategy
Exercise patience and wait for technical confirmations before trading. Resist the urge to react impulsively to news releases. Always prioritise disciplined trading over FOMO (Fear of Missing Out).
