Dollar extends losses ahead of nonfarm jobs report

As we transition to the latter parts of the working week, the focus will be shifting towards OPEC and oil prices, as well as the US economy with Friday’s jobs report set to take centre stage.

Market update: As we transition to the latter parts of the working week, the focus will be shifting towards OPEC and oil prices, as well as the US economy with Friday’s jobs report set to take centre stage. Elsewhere, the pound remains in focus as we get closer to the December 12 UK snap election. Sterling’s ongoing rally prevented the FTSE from staging a similar rebound we saw in other global stock markets yesterday. Today, the FTSE fell again, and US equity markets struggled shortly after the open amid confusion over the US-China trade situation and concerns over valuations.

Dollar under pressure: The surging British pound has also helped to keep the Dollar Index under pressure, now down for the fifth consecutive day. The buck has also been undermined by a rallying Canadian dollar after the Bank of Canada’s hawkish rate hold the day before. Also pressuring the DXY is the euro, which pushed higher today despite poor European data as Eurozone retail sales and German factory orders both fell more than anticipated. If stock markets were to fall further then the yen may strengthen on haven demand, which could provide the final nail in the coffin for the Dollar Index.

NFP eyed: The dollar will be impacted more directly from US data tomorrow when the nonfarm payrolls report is released. My US colleague Matt Weller will be posting an NFP preview article shortly on our website. But if jobs disappoint and disappoint badly, then the markets may start to price in a sooner-than-expected rate cut in 2020. However, a surprisingly strong showing could help alleviate the pressure currently being exerted on the buck.

Dollar Index breaking down: Thanks to the surging back of the above foreign currencies, the DXY has been trending lower since peaking in early October at just shy of 100.00. On Friday of last week, the DXY made a distinct lower high in the form of a false break reversal above a short-term peak. As result of that false break out attempt, we have seen continued falls throughout this week. The index has now broken below a short-term low and also the 200-day moving average. At the time of writing, the DXY was around 35 points shy of taking out the old lows around 97.10. Standing in the way of that liquidity pool was short-term support around 97.45. So, this 97.45 level needs to give way if we are to see the DXY take out 97.10, and in the process form another lower low. I think it may be only a matter of time before that low is taken out, judging by recent price action.


Source: Trading View and City Index.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.