By: Michael Boutros, Sr. Technical Strategist
The U.S. dollar has rallied more than 3.5% off its August lows and is now pressing into a major resistance zone, where the 2024 swing highs meet the upper edge of this year's uptrend. U.S. nonfarm payrolls are the next major event risk for the U.S. dollar, and a soft employment read could curb expectations for the Federal Reserve's next rate move just as the U.S. Dollar Index tests that zone. Short-term momentum is already stretched, with daily and four-hour readings deep in overbought territory. Here's what happened in the run-up, and why the labor report now carries extra weight for the U.S. dollar.
Michael Boutros, Senior Market Analyst at StoneX, covers foreign exchange and commodities through multi-timeframe technical analysis, tracking trend structure, momentum and key price zones from the weekly chart down to the four-hour chart. His work on the U.S. dollar pairs that chart structure with the U.S. data calendar and the Federal Reserve event risk that moves currency markets.
The U.S. Dollar Index has cleared a key pivot at its 2024 lows and extended its rally to fresh yearly highs, running straight into the zone where the September and May 2024 swing highs meet the upper parallel of this year's uptrend. "We're poised to mark a third consecutive weekly advance, with the rally now approaching a pivotal resistance zone," Boutros says. Weekly momentum has reached its highest level of the year at the top of a range it has held all year, and a break of that range would shift the U.S. dollar's momentum profile in favor of the bulls. Specifically, a daily close above the resistance zone is what would validate the next major leg of the U.S. dollar advance. Conversely, a break below near-term support would clear the uptrend from September and open the door to a larger pullback.
According to Boutros, "momentum here is still in overbought territory. That keeps the momentum in favor of the bulls for now." U.S. nonfarm payrolls are the catalyst that lands on top of that stretched U.S. dollar setup, and Boutros adds that the focus "is on this major inflection zone specifically as we head into the start of the quarter with major event risk on tap". A soft employment read could curb expectations for the Federal Reserve's next rate move. All things held constant, however, Fed funds futures still price at least one more Federal Reserve rate move before the end of the year. As a result, the payrolls release arrives at the exact point where the U.S. dollar either breaks through resistance or turns lower to start the quarter.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
StoneX TV content is created, produced, and distributed solely by StoneX Media Ltd (“StoneX TV”) and is provided for informational and educational purposes only. StoneX TV does not provide investment, financial, legal, or tax advice and does not make any recommendation or endorsement of any investment strategy, transaction, or financial instrument. Nothing in this content constitutes, or should be construed as, investment advice or a recommendation to buy, sell, or hold any financial instrument, including securities, futures, derivatives, digital assets, foreign exchange products, or CFDs. This content does not constitute an offer, invitation, or solicitation to engage in any investment activity. The information presented is general in nature and is not tailored to the financial situation, investment objectives, or risk tolerance of any specific person. You should not rely on this content as a substitute for independent professional advice. Investing and trading in financial instruments involves significant risk of loss and is not suitable for all investors. Past performance is not indicative of future results. Any views or opinions expressed are those of the presenter at the time of publication and are subject to change without notice. Such views may not necessarily reflect those of StoneX Media Ltd or its affiliates. StoneX Media Ltd and its affiliates, including StoneX Group Inc., may from time to time have positions in, or engage in transactions involving, the financial instruments referenced. This content may include general market commentary and opinion. It does not constitute independent investment research and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. StoneX Media Ltd is not authorised or regulated to provide investment services and does not act in a fiduciary capacity. StoneX Media Ltd is incorporated in Ireland and operates in accordance with applicable Irish law. It is a wholly owned subsidiary of StoneX Group Inc. and is a separate legal entity from other subsidiaries within the StoneX Group, which may be regulated in various jurisdictions. StoneX Media Ltd does not act on behalf of, or provide services for, any regulated affiliate. This content is not directed at, and may not be distributed to, any person in any jurisdiction where such distribution would be contrary to local laws or regulations. Supporting documentation for any claims, comparisons, statistics, or technical data may be made available upon reasonable request, where applicable.
Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
U.S. nonfarm payrolls land just as the U.S. dollar presses into a major resistance zone after a three-week rally. With short-term momentum deep in overbought territory and Fed funds futures shifting, the labor report is the next test for the U.S. dollar's advance.
A more aggressive Federal Reserve is pulling demand toward the U.S. dollar and narrowing the interest rate advantage that has supported higher yielding currencies. Julian Pineda explains what a firmer dollar means for the Mexican peso, the Canadian dollar and the wider emerging market currency complex.
The RBA hikes rates to 4.6% as inflation risks persist, while Bullock keeps further tightening on the table and the Australian dollar weakens.
Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.
Reach
With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency
As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise
From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.
