The Greenback is trading neutrally this week,
with the U.S. Dollar index (DXY) adding 0.1% to reach 102.83 points. The EURUSD
has risen at the same pace to 1.09320, indicating good market synchronization.
Last Friday, the Dollar experienced a 1.3% loss as the EURUSD peaked at
1.09810, the highest level since January 12. Despite a subsequent retreat, no
reversal formations have been detected, suggesting a potential further decline
of the Dollar.
The primary reason for the Dollar's weakening
is the cooling labor market in the United States. February Nonfarm Payrolls
significantly surpassed consensus, reaching 275,000 compared to the expected
140,000. However, the unemployment rate rose to 3.9% from 3.7%, and average
hourly earnings slowed down to 0.1% MoM, falling short of the expected 0.2% MoM
and the 0.5% rise in January. This marks the lowest number since February 2022.
These developments had a minor effect on
interest rate cut bets, which stood at 19.2% in May and 57.5% in June. The U.S.
10-year Treasuries yields fell to 4.03%, reaching the lowest level since
February 2. Federal Reserve (Fed) Chair Jerome Powell, emphasizing that
policymakers are unlikely to cut Fund rates until inflation is fully under
control, halted a potential increase in these bets. Powell practically
sacrificed unemployment targets in favor of addressing inflation, which appears
to be a major concern for the regulator. U.S. February inflation data is
expected in the coming days, with Wall Street anticipating mixed results.
Simultaneously, investors were withdrawing
from the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU), which reported
$7.8 million in net capital outflows last week. Moderate inflation numbers and
declining demand for the Greenback may keep the EURUSD above the support at
1.09000-1.09300, potentially pushing the Dollar further down. The next
resistance for the pair is at 1.10000-1.10300.
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