Market Data 
- The DXY softened near 106.30 on Tuesday.
- The DXY weakened despite a rise in JOLTs figures from October due to profit-taking.
- Fed policy remains data dependent with odds of a December cut rising to nearly 75%.
In Tuesday’s session, the US Dollar Index (DXY) weakened despite a rise in Job Openings & Labor Turnover (JOLTs) figures from October. This weakness may be attributed to profit-taking after recent rallies against major G20 currencies. Economic data from China, including a cut in deposit rates and details of a stimulus package, contributed to the DXY’s decline.
This week’s labor market data will guide the Greenback’s dynamics as it will direct the odds of the December cut expectations by the Federal Reserve (Fed).
Daily digest market movers: US Dollar retreats as investors assess JOLTs figures, Kugler statement
- Job Openings in the US climbed to 7.74 million in October. This figure surpassed market estimates of 7.48 million and marked an increase from September’s 7.37 million figure.
- October saw little change in hires, remaining at approximately 5.3 million.
- Total separations also held steady at around 5.3 million and resignations (quits) rose to 3.3 million, while layoffs and discharges showed minimal change at 1.6 million.
- On the Fed’s policy front, its stance remains data-dependent, with policymakers leaving options open for the December meeting, but overall economic activity remains resilient and that might push officials to think twice before signalling aggressive easing.
- The Fed’s Adriana Kugler was on the wires, giving her view on the central bank’s stance.
- Kugler stated that the Fed’s policy is flexible, well-positioned for uncertainties, and aims to achieve a neutral stance as inflation trends toward 2%.
- Kugler commented that the economic strength stems from a solid labor market, productivity growth and immigration, though risks like supply shocks remain.
- Kugler stressed that disinflation continues, with modest labor cooling balancing progress; trade policy impacts are yet unclear.
DXY technical outlook: US Dollar Index has bright outlook, supported by bullish trend and recent surge above 106.50
The index rose above 106.50 overnight, boosted by positive economic data and a hawkish Fed stance. However, the Index has retreated to 106.14 at the time of writing. The DXY has secured the 20-day SMA, indicating a bullish trend. Buyers are looking to defend this level and retest the 107.00 area.
Technical indicators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), suggest mixed signals but that the uptrend is likely to continue. The MACD is below its signal line, indicating the presence of bearish momentum, but the RSI remains firm above 50. The key support is found at 106.00-106.50, while resistance is at 107.00.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
