US Dollar declines on mixed US data

• US Dollar weakened on Thursday after mixed US economic data.
• S&P Global Services PMI and ISM Services PMI showed expansion in the service sector.
• Labor data showed some signs of weaknesses.

On Thursday, the US Dollar Index (DXY), a measure of the USD against a basket of six currencies experienced volatility following the release of mixed economic data from the United States. Labor data showed weakness in the sector, while Services figures were strong.

With the US economic outlook mixed, signs of cooling in the labor market are making investors put some bets on a larger cut in September.

Daily digest market movers: US Dollar stands weak after labor figures, steady dovish bets

• ADP Employment Change missed estimates, falling to 99,000 from 122,000, while the prior month was revised down to 111,000.
• Initial Claims came in at 227,000 from 232,000 previously, while Continuing Claims fell from 1.860 million to 1.838 million.
• In addition, Nonfarm Productivity saw a small uptick to 2.5% from 2.3%, while Labor Cost fell from 0.9% to 0.4%.
• S&P Global's Services PMI rose from 55.2 to 55.7, and the Composite PMI increased from 54.1 to 54.6. The ISM's Services PMI improved slightly from 51.4 to 51.5.
• Contributing to the cooling labor market, the Employment Index in the ISM Services PMI declined from 51.1 to 50.2.
• Following the data, the CME Fedwatch Tool indicates a 55% chance of a 25 bps rate cut in September and a 45% chance of a 50 bps cut, with further cuts expected thereafter.

DXY technical outlook: Technicals suggest continued bearish momentum, testing support at 100.50

The DXY index's technical indicators have resumed their downward trajectory and remain in negative territory. Despite a recent recovery attempt, the index encountered resistance at its 20-day Simple Moving Average (SMA), resulting in a rejection of buyers.

As a result, the DXY is poised to revisit the 100.50 (August lows) support level. Above, support levels include 101.30, 101.15, and 101.00, while resistance levels are located at 101.80, 102.00, and 102.30.

Indicators-wise, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to suggest bearish momentum as they are still in negative terrain.