Harris and Weak U.S Labour Market Are Pushing the Dollar to the Downside

The U.S. Dollar Index (DXY) has fallen 0.4% to 103.89 this week as the EURUSD rose 0.66% to 1.09050, showing potential for further upside. This marks the Dollar’s first weekly decline after four straight gains, pressured by disappointing October Nonfarm Payrolls data, which came in at a low 12,000 versus the expected 106,000. Although weak ISM manufacturing PMI of 46.5 and Middle Eastern tensions briefly lifted the Dollar on Friday, disappointing macro data overall is weighing on it.

Market sentiment is now influenced by rising election probabilities, with Kamala Harris's potential win viewed as a bearish factor for the Dollar, while a Trump win is expected to strengthen it. The EURUSD faces key resistance at 1.09200-1.09400; breaking this level could propel the pair towards 1.10000-1.11000. The upcoming U.S. presidential election and central bank rate decisions from the Fed and BoE on Thursday could drive volatility, particularly as both banks are expected to cut rates by 0.25%. The BoE may hint at pausing cuts, which could support the GBPUSD, potentially lifting it from 1.29800 to 1.32500.

In the market, large investors have shown minimal movement, with the WisdomTree Bloomberg US Dollar Bullish Fund (USDU) maintaining a neutral balance over the last two weeks. However, a notable $25.7 million position remains in favor of Dollar weakness, possibly aiming for the EURUSD to reach 1.10500-1.11000, as the broader Dollar outlook softens amid evolving macroeconomic and political uncertainties.