Solid Jobs Report Sends the US Dollar Higher

FXOpen

The US dollar reversed the recent losses and closed the last week higher. Responsible for the move was the July NFP report.

The market expected a positive report, but the outcome exceeded expectations. The US economy added over 940k new jobs in July. Moreover, the data for the previous month was revised higher by over 100k jobs.

All the elements in the report pointed to a strong recovery of the US economy. Besides the better headline number, the Unemployment Rate declined to 5.4% – another positive development.

Sure enough, the US economy still needs to recover about 5 million jobs lost during the pandemic. But solid reports like the one from last Friday bring the Fed closer to fulfill its employment mandate, and thus the tightening of the financial conditions may be just around the corner.

The Fed, as a central bank, has a dual mandate. It aims at price stability and maximum employment.

The price stability mandate is monitored by the changes in inflation. Inflation is already above Fed’s target, even though it is unclear how long is the period the Fed looks at averaging inflation to 2%.

What remains is improvements in the labor market – and the July NFP report shows such improvements. The bias is now that the Fed will announce the tapering of its asset purchases sooner than expected, and so the US dollar ticked higher on the news.

Solid Jobs Report Sends the US Dollar Higher

The Technical Picture Also Favors a Stronger Dollar

From a technical analysis perspective, the US dollar may be at the end of a cycle. The Dollar index formed a double top at the 100 level, but it recently found both horizontal and dynamic support in the 90 area.

A quick look at the rising trend reveals the fact that the Dollar index has kept the series of higher lows intact, just like it is supposed to do in a rising trend. Hence, as long as the index holds above 89, the bias remains bullish.

Moving forward, traders will look for clues about what the Fed will do next. Is the July NFP report strong enough to trigger earlier tapering? If yes, the US dollar’s rally should continue unabated.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Is the UK really in a recession? Perhaps 2024 data will be different Weekly Market Wrap With Gary Thomson: US INFLATION, GBP/USD, GOLD, BITCOIN EURGBP continues to be suppressed during February. Will it rise again? Weekly Market Wrap With Gary Thomson: S&P 500, CAD, GBP/USD, AMZN GBPUSD Displays Volatility as Pound Demonstrates Low Performance

Latest articles

Indices

Nvidia's Successes Helps S&P 500 Price Reach Its All-time High

Yesterday, the price of the S&P 500 stock index rose to record closing highs on Thursday. Moreover, such a growth rate (+2.11% per day) has not been observed for 13 months. Reasons for Extremely Bullish Sentiment: → Nvidia's

Forex Analysis

Market Analysis: AUD/USD and NZD/USD Grind Higher Steadily

AUD/USD is moving higher and might rally if it clears 0.6600. NZD/USD is also rising and could extend its increase above the 0.6220 resistance zone. Important Takeaways for AUD/USD and NZD/USD Analysis Today· The

Forex Analysis

Commodity Currencies Strengthen after the FOMC Minutes Publication

The fundamental data of recent trading sessions contributed to a slight strengthening of commodity and European currencies. Thus, the AUD/USD pair, after forming a bullish engulfing combination, managed to confidently gain a foothold above 0.6500. The pound/US

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65.68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.