US Dollar, DXY, NFPs, Technical Analysis – Asia-Pacific Market Opening:
- The US dollar strengthened against its major counterparts on Monday
- Liquidity returned, allowing markets to fully digest the NFP
- DXY bounced off a key support zone, will momentum continue?
Asia-Pacific Market Briefing – Markets fully digest last week’s NFP data:
The US dollar advanced against its major counterparts on Monday, continuing a string of cautious gains. Its performance dates back to Friday, when another solid US labour market report came through. During this time, Wall Street was out of action for the Good Friday holiday, which meant that the full reaction did not occur until liquidity was restored in the last 24 hours.
The number of new jobs created in March was 236k, slightly above the consensus estimate of 230k. This represented a slowdown from February’s revised 326k. At the same time, the unemployment rate unexpectedly fell to 3.5% instead of remaining at 3.6%. At the same time, the labour force participation rate rose from 62.5% to 62.6%. This indicates that the economy was able to absorb the increase in the labour force without an increase in unemployment.
The key takeaway from the labour market report was that another 25 basis point rate hike by the Federal Reserve is likely when it announces its policy in May. In response, government bond yields have risen since the employment report. Wall Street, however, was unimpressed. At the end of Monday, the Dow Jones and the S&P 500 closed higher. The technology-heavy Nasdaq Composite, on the other hand, was virtually unchanged.
For Asia-Pacific trading on Tuesday, the most important economic data on the agenda are the Chinese inflation figures (CPI and PPI) for March. With China recovering from its covid zero strategy, investors will be watching to see if these figures show signs of rising price pressures, which could point to an accelerating economy.
Technical analysis of the US dollar
A look at the DXY dollar index shows that the greenback is trending higher after crossing the critical support zone between 101 and 101.29. This could open the door to further gains, but the simple moving average (SMA) of the 100-day line remains above it. It could prove to be resistance and maintain the downtrend (as it did on several occasions in March).