By: Michael Boutros, Sr. Technical Strategist
A strong nonfarm payrolls report removed the labor market from the center of the U.S. dollar debate and left inflation data as the release that moves the currency. The U.S. dollar index has spent four consecutive weeks above the same lateral support zone while that handover took place, with the monthly opening range still taking shape above it. Employment risk had been the live concern for the Federal Reserve, and a firm payrolls print eased it. What remains is a market watching one side of the mandate, with consumer price index data arriving into a technical picture that has not yet resolved.
Michael Boutros is a Senior Market Analyst at StoneX Media with more than 20 years trading foreign exchange, commodities and equity indices across trade desks. He follows the U.S. dollar through a structured multi-time-frame technical approach with a medium-term, event-driven focus, working across the macro releases and policy events that reprice currency markets.
Strong nonfarm payrolls data took labor market stress off the list of things pressuring the U.S. dollar. That matters because employment weakness and inflation pull Federal Reserve policy in opposite directions, and a firm jobs number quiets one of them. With the labor side settled for now, the U.S. dollar's sensitivity concentrates on price data rather than on payroll surprises. As Boutros puts it, "Nonfarm payrolls were extremely strong and ceasing some of those concerns about potential stress in the labor markets."
Consumer price index data has become the single release that reprices Federal Reserve expectations and, consequently, the U.S. dollar. According to Boutros, "a hotter than expected print is really going to solidify the need for the Fed to have to move", with a softer reading working the other way and giving policymakers room for a wait and see approach. The market context sharpens the effect, since the U.S. dollar index is "testing key lateral support, a key pivot in price right ahead of major event risk". For traders, the practical consequence is that positioning risk sits with the inflation release rather than spread across the macro calendar.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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