US Dollar declines ahead of US election

• US Dollar declines after increased probability of VP Kamala Harris winning the Pennsylvania vote.
• NFP in the US rose by 12,000 in October on Friday, starkly missing expectations.
• Markets fully price in a 25 bps cut at Friday's FOMC decision and 85% chance of another cut in December.

The US Dollar (DXY), which measures the value of the USD against a basket of six currencies, fell to a fresh nine-day low on Monday after polls showed Vice President Kamala Harris taking the lead in the US presidential election. The drop marks a reversal of the USD's recent strength, which had been driven by expectations of a Donald Trump victory and strong economic data.

The US Dollar has faced temporary setbacks due to profit-taking but has rebounded, consolidating near 104.00. The upcoming Federal Reserve (Fed) decision on Friday, as well as the outcome of the US election, is expected to influence the DXY's direction, with markets pricing in a 25-basis-point rate cut.

Daily digest market movers: US Dollar declines amidst presidential election volatility, markets digest NFP

• The disappointing Nonfarm Payrolls report of 12,000 net new jobs in October despite a consensus estimate of 113,000 triggered a decline in the US Dollar.
• The Unemployment Rate remained unchanged at 4.1%, while the Labor Force Participation Rate inched down to 62.6%.
• The Average Hourly Earnings increased to 4% YoY from 3.9%, suggesting continued wage inflation.
• The robust Services PMI, which rose to 54.9 from 51.5, contradicted the weak NFP data.
• Markets expect a 25 bps cut from the Fed next week and another 25 bps cut in December.
• No Fed speakers are scheduled this week due to the media blackout before the FOMC meeting.
• Bets on a Donald Trump victory in the presidential election, expected to lead to inflationary policies, also supported the US Dollar in the last several sessions, but weekend polls showing rising odds in favor of Kamala Harris have triggered a decline.

DXY technical outlook: DXY consolidates under 104.00 bearish momentum seen

The DXY index continues consolidating around the 103.70 level. The Relative Strength Index (RSI) points downward, escaping overbought territory, while the Moving Average Convergence Divergence (MACD) prints lower green bars.

Key support levels to watch are 103.50, 103.30 and 103.00, while resistance levels are 104.00, 104.50, and 105.00.