The US dollar retreats further ahead of weekly jobless claims and ADP

• The US dollar is trading sideways ahead of a very busy date on Thursday.
• Markets are still worried about headwinds for Europe and the Nvidia subpoena.
• The US dollar index is retreating and flirting with a break below 101.00.

The US dollar (USD) is trading lighter on Thursday, with plenty of data points due to be released in a condensed timeframe. The greenback had already eased on the back of the JOLTS Job Openings report on Wednesday, when the previous number was revised down and the recent print for July was below estimates. It was enough for markets to price in more interest rate cuts by the Federal Reserve (Fed) and devalue the US dollar amid a narrowing interest rate gap between the US and other countries.

As for the economic data, it will be up to experienced traders to navigate the data set that will be released to the markets on Thursday. Of note is the monthly ADP Employment Change for the release of private payrolls and the weekly Initial/Continuing Jobs Claims, which will move the US dollar. Also of note is the Services Purchasing Managers’ Index (PMI) data from the Institute for Supply Management (ISM).

Daily Market Summary: Guide the Data

• At 11:30 GMT, the Challenger job cuts for August will be released. The previous number was 25,885.
• At 12:15 GMT, the ADP hiring change for August will weigh on markets. An increase to 145,000 is expected from the previous number of 122,000.
• At 12:30 GMT, weekly jobless claims data is due out.
• Initial claims are expected to be flat at 230,000 in the week of August 30, from 231,000 the previous week.
• Continuing claims will reach 1.87 million in the week of August 23, up from 1.868 million.
• In the slipstream of weekly jobless claims, non-farm productivity and unit labor costs for the second quarter will be released monthly. For non-agricultural productivity, steady growth of 2.3% is expected, while unit labor costs should remain at 0.9%.
• At 13:45 GMT, S&P Global will provide its final reading for services and composite PMI numbers for August. Services are expected to hold steady at 55.2 and the composite is expected to remain at the previous reading of 54.1.
• The Institute for Supply Management (ISM) will close Thursday’s data batch at 14:00 GMT with its August reading for the Services sector:
  • The headline PMI is expected to come in at 51.1, down from 51.4 in July.
  • The employment index was at 51.1 the previous month, with no forecast available.
  • The new orders index was at 52.4 in July, with no forecast available.
  • The price paid index was at 57, with no estimate written.
• Shares are reeling after the hit they took on the back of NVIDIA’s ( NVDA ) correction after the company received a subpoena from the US Department of Justice for violating antitrust laws. All major indices are in the red, although generally below 1%.
• The CME Fedwatch tool shows a 55.0% chance of a 25 basis point (bps) interest rate cut by the Fed in September, compared to a 45.0% chance of a 50 basis point cut. Another 25 bps cut (if September is a 25 bps cut) is expected in November at 30.2%, while there is a 49.5% chance that rates will be 75 bps (25 bps + 50 bps ) below current levels and a 20.3% probability of rates being 100 (25 bps + 75 bps) basis points lower.
• The benchmark US 10-year yield is trading at 3.76%, the lowest this week.

US Dollar Index Technical Analysis: Not looking good

The US Dollar Index (DXY) appears to be stuck in a tight range, staying there for now after Tuesday’s data failed to move the needle. With Wednesday’s JOLTS Job Openings report, the assumption is the same: Any number that is substantially above or below consensus will move the DXY in either direction. Meanwhile, markets are giving a higher chance of a 50 basis point rate cut by the Fed this month.

The first resistance at 101.90 is starting to look very difficult to break after already triggering a rejection earlier this week. Above, a steep 2% rally would be needed to bring the index to 103.18. Finally, a high resistance level near 104.00 not only holds key technical value, but also carries the 200-day simple moving average (SMA) as a second heavyweight limiting price action.

On the downside, 100.62 (December 28 low) could see a test soon if data supports more rate cuts from the US Federal Reserve (Fed). Should it break, the July 14, 2023 low at 99.58 will be the ultimate level to watch. Once this level breaks, early 2023 levels approach 97.73.

US Dollar Index: Daily Chart