US Dollar rebounds after NFPs and ISM PMIs

• US Dollar retreated after posting solid gains in recent weeks.
• Nonfarm Payrolls increased by 12,000 in October, falling short of market expectations.
• Markets remain almost fully pricing in a 25 bps cut by the Fed next week.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, rebounded intraday despite the weak jobs data as annual wage inflation rose to 4%, indicating that inflationary pressures remain elevated. In the meantime, markets remain almost fully expecting a 25 basis-point-cut by the Federal Reserve (Fed) next week. On the data front, ISM PMIs also came in mixed from September.

The DXY continues to trade sideways near 104.00. Despite persistent inflation, weak job growth data raises expectations of a less hawkish Fed stance, which might start to weaken the USD.

Daily digest market movers: US Dollar recovers after NFPs

• Nonfarm Payrolls in the US rose by a mere 12,000 in October, significantly missing market expectations of 113,000.
• The Unemployment Rate remained unchanged at 4.1%, in line with expectations.
• Wage inflation, as measured by Average Hourly Earnings, rose to 4% from 3.9%.
• Business activity in the US manufacturing sector continued to contract at a faster pace in October, with the ISM Manufacturing PMI dropping to 46.5 from 47.2 in September. This figure came in below the market expectation of 47.6.
• The Services PMI rose to 54.9 in October, indicating a strong expansion in the US service sector.
• Markets are pricing in a 25 bps cut by the Fed next week and an 85% chance of another 25 bps cut in December.

DXY technical outlook: DXY consolidating, finds support the 200-day SMA

The index retested the 200-day Simple Moving Average (SMA) support at 104.15 and buyers successfully defended it. The Relative Strength Index (RSI) is pointing down, still near overbought territory, and the Moving Average Convergence Divergence (MACD) is printing lower green bars, indicating bearish momentum. In that sense, if buyers show resilience it may present better around the mentioned SMA.

Key support levels include 104.15, 104.05, and 104.00, while resistance is encountered at 104.70, 104.90, and 105.00. Traders monitor these levels closely for breakout opportunities.