The USD Is Keeping Balance

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Includes: UDN, UUP
by: Dmitriy Gurkovskiy
Summary

The labor market statistics turned out to be rather mixed.

Statistics reading don’t prevent the Federal Reserve from raising the key interest rate.

The US Dollar remains strong.

In October, the Non-Farm Payrolls added 252K, although it was expected to expand by 313K. However, the September report was revised upwards (+15K) and sort of wore off the first impression of the statistics. The Average Hourly Earnings didn't change; on YoY, it's still 2.4%. This report also got investors' attention: the predicted reading was 2.7% y/y. There was a similar situation this year, when the capital market focused on this very parameter and prevented the USD from being supported by other reports, which were pretty good. Another labor market report, the Unemployment Rate, managed to keep balance between pessimists and optimists among investors. The indicator decreased from 4.2% to 4.1%, which is the lowest reading over the last 16 years. Is it good? Sure thing.

The fact that the salaries didn't change may interfere with the way the inflation is growing, at least as the Federal Reserve and the government expect it to. This is why the USD plummeted right after the statistics had been published. However, both the Federal Reserve and the White House are very careful in their predictions and they are not worried that the CPI is a bit behind the target they specified. No one is waiting for a miracle here.

If we link all key statistics parameters together, an average employment reading is a little bit lower than expected. But it is unlikely to stop the Federal Reserve, which is going to raise the benchmark interest rate one more time in December. According to the CME futures, investors' expectations of the rate hike are 100%.

The US dollar remains strong and the EUR/USD pair still have chances to get stabilized close to 1.1600 by the end of the first decade of November.

From the technical point of view, the EUR/USD pair is moving inside the descending channel. The current downside target is the support area between 1.1508 and 1.1486. After reaching this area, the price is highly likely to return to the upside border of the current channel at 1.1672. If the instrument rebounds from the resistance level, it may start a new descending impulse with the target at 1.1328.

Author: Dmitriy Gurkovskiy, Senior Analyst at RoboForex

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.