US Dollar declines on weak labor and inflation data

• Weak labor data led to a decline in the US Dollar during Thursday session.
• Initial Jobless Claims remained at 230K, indicating a persistent labor market.
• PPI fell short of expectations, signaling a potential easing of inflation, which also added to the USD's downside.

The US Dollar Index, which measures the value of the USD against a basket of six currencies, is posting daily losses after soft labor and inflation data. 

Despite positive economic indicators, current market valuations may be overly optimistic. Recent data reveals that the US economy remains robust, expanding at a rate exceeding expectations. 

Daily digest market movers: DXY down after inflation and labor data 

• The US Dollar declined against its major rivals amid dovish signals from the latest US labor market and inflation reports.
• Initial Jobless Claims, a proxy for layoffs in the US, increased to 230K in the week ended September 7, matching estimates and slightly above the prior week's upwardly revised 228K.
• The advance seasonally-adjusted insured unemployment rate remained unchanged at 1.2%, and the 4-week moving average rose to 230.75K.
• The Producer Price Index (PPI) for final demand in the US rose 2.2% YoY in July, below the 2.3% market forecast and the previous 2.7% increase.
• The annual core PPI rose 2.4%, missing the 2.7% consensus estimate. On a monthly basis, the PPI increased 0.1%, while the core PPI remained flat.
• The CME FedWatch tool indicates a 13% probability of the Fed cutting interest rates by 50 basis points in September, unchanged from before the PPI release.
• These reports suggest that the US labor market remains resilient despite economic headwinds, while inflation pressures may be moderating, supporting the Fed's dovish stance.

DXY technical outlook: DXY resumes downside, breakout improves outlook

Technical analysis indicators for the DXY index have resumed their downward trend in negative territory. However, on Tuesday, the index regained the 20-day Simple Moving Average (SMA) at approximately 101.60. This breakout has improved the short-term outlook, and the immediate task for buyers is to hold this level.The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators remain in negative territory, suggesting bearish momentum. However, both indicators are showing some signs of upward movement, which could indicate a potential reversal in trend.

Supports are located at 101.60, 101.30 and 101.00. Resistances are found at 101.80, 102.00 and 102.30.