Market Data 
- The US Dollar’s bullish momentum loses strength after weak job opening figures.
- A downbeat ADP employment report might increase the bearish pressure on the US Dollar.
- Failure to break the 104.55 resistance has brought 103.95 support into focus.
The US Dollar Index (DXY) is showing a moderately softer tone on Wednesday’s European session. Softer-than-expected JOLTS Job Openings sent US Treasury yields lower on Tuesday, increasing the negative pressure on the US Dollar (USD).
Job Openings came in at the lowest level in more than three years in September. These figures cast some doubt on the health of the labour market ahead of Friday’s Nonfarm Payrolls (NFP) report, with the Federal Reserve’s (Fed) monetary policy decision only one week away.
On Wednesday, the third quarter’s US Gross Domestic Product (GDP) is expected to show the world’s largest economy grew at a steady pace in the third quarter, in contrast with the rest of the world’s major economies.
The ADP Employment Report, however, might steal the show. The market consensus anticipates a significant decline in job creation that might increase concerns about the employment market, triggering a deeper US Dollar correction.
Daily digest market movers: The US Dollar shows signs of weakness ahead of key US releases
- US JOLTS Job Openings fell to 7.44 million in September, while August’s reading was revised to 7.86 million from the 8.04 million previously estimated.
- Futures markets are now fully pricing in a quarter-point interest-rate cut by the Fed at its meeting next week, according to data from the CME Group’s FedWatch tool. The chances of another 25 bps cut in December have increased to 76.6% from 72% at the start of the week.
- Later on Wednesday, the US Gross Domestic Product (GDP) is expected to show that the economy grew at a 3% annualized pace in the third quarter, the same pace as the previous quarter.
- The ADP Employment Report, however, is likely to add to the evidence of a loosening labor market, with a 115K increase in October, down from September’s 143K rise.
- On Thursday, the Personal Consumption Expenditures (PCE) Prices Index, The Fed’s inflation data of choice, is expected to show that price pressures continue to ease, with the core reading down to 2.6% yearly from 2.7% in September.
- The highlight of the week will be Friday’s NFP report, which is expected to show a significant decline in new payrolls. Such an outcome might hurt speculative demand on the US Dollar.
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DXY technical outlook: Showing signs of topping at 104.55
The DXY index keeps its bullish bias intact but the pair’s failure to break the resistance area above 104.55 might give fresh hopes for bears.
The 4-hour Relative Strength Index (RSI) shows a bearish divergence and has crossed below the 50 level, a negative sign. The index, however, should slide below Friday’s low, at 103.95 to confirm a deeper correction and shift its focus towards 103.40. Resistances are at the 104.55 – 104.75 area and 105.20.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
