As we approach Friday’s Nonfarm Payrolls (NFP) report and with the USD facing a fourth day of decline, there’s plenty of volatility on the horizon for forex traders.
This month, all eyes are on the U.S. election and the potential further depreciation of the dollar, as central bank decisions, inflation data, and employment figures all influence market trends.
Let's break down what traders need to know as we navigate this pivotal moment and how you can maximise your trading power with Vantage’s exclusive bonus offer.
💵 The Dollar at a Crossroads
The U.S. Dollar Index (DXY) has been drifting lower, hovering near its 103.90 support level, largely influenced by global economic data and market expectations for the NFP.
Here’s what’s currently shaping USD movements:
US Macro Data: The latest ADP employment report exceeded forecasts, suggesting resilience in the labour market, which has initially propped up some support for the USD.
However, Q3 GDP growth missed targets, leaving markets questioning how aggressive the Fed’s next moves will be in response to economic fluctuations.
Global Monetary Policies: With the Bank of Japan hinting at gradual tightening, the Japanese Yen has found support against the dollar, adding downward pressure to USD. Similarly, the ECB’s resistance to aggressive rate cuts could keep the Euro strong, intensifying the USD’s fall.
Technical Indicators: The DXY’s 50-SMA breach and bearish RSI divergence indicate weaker momentum. A drop below 103.90 could signal a deeper correction, targeting levels like 103.40 if the NFP disappoints.
Key Markets to Watch
This week’s market setup ahead of the NFP and the U.S. election makes it an ideal environment for informed trades. Here are two assets in focus:
Gold (XAU/USD): With the USD under pressure, gold could see a rally, especially if the NFP underperforms, reinforcing gold’s safe-haven appeal.
Bitcoin (BTC/USD): Rising demand for alternative assets amid dollar weakness may also boost Bitcoin. Watch for any continuation in upward trends following Friday’s data.
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