Dollar bulls were provided a lifeline during trading on Friday following the firm NFP figure of 215k which displayed signs of US labor market resilience in a period of slowing global growth. The market reaction was noticeably dull and this may have been the result of Janet Yellen’s dovish comments earlier this week that deteriorated any expectations of US rates hiked anytime soon. Although the unemployment rate went back to 5%, average hourly earnings smashed analyst expectations climbing to 0.3% which could be Dollar positive. Sentiment still remains bearish towards the Dollar and the diminishing expectations over the Fed taking action in Q2 should encourage sellers to attack the currency further.
With global instabilities and ongoing China woes exposing the US economy to downside risks, they may dictate if the Federal Reserve respects its pledge in raising US rates twice this year. It is quite apparent that the Fed is currently in standby mode with US data becoming secondary when deciding whether to raise US rates. On the bright side, today's firm NFP may add to the building blocks that could provide a compelling reason for the Fed to take action later this year if global uncertainties subside.
The Dollar Index still remains bearish on the daily timeframe and bears have been almost unmoved by the strong NFP report. Dollar vulnerability may continue to take center stage and this should encourage bearish investors to send prices lower. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. Previous support at 95.50 may transform into a dynamic resistance which could trigger a further decline towards 94.00.
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