Daily market commentary: The US dollar index touches the lowest level since June

Forex

The US dollar index touched the lowest level since June, as European trading got underway this Friday. The index, a measure of the strength of the greenback versus a basket of other major currencies, has been receding from the historical maximums reached at the end of the summer. Behind this decline are expectations that the Federal Reserve will moderate the pace and scope of its monetary tightening cycle, comparative to what had been expected earlier in the year. Against this background, today’s release of Non-Farm Payroll data is anticipated with some anxiety by dollar traders. The consensus points at a slowdown in the American labour market, with around 200,000 new jobs created in November. However, a number disappointing to the downside could reduce the Fed’s field of action even more, in a scenario that could generate more dollar losses. On the other hand, a surprise to the upside would have the opposite effect, and could embolden the Federal Reserve to hike rates by 75 basis points in December, a move that would certainly see the dollar claiming back at least some of its recent losses.

Ricardo Evangelista – Senior Analyst, ActivTrades

Daily Market Commentary

European Shares

Stocks in Europe extended the uncertain trend registered overnight in Asia, drifting slightly lower, as investors brace for today’s highly awaited US job report.

This week’s optimistic tone brought by Fed chairman, Jerome Powell’s, less aggressive stance as well as the prospect of an economic reopening in China, is being tempered on Friday as investors were tempted to take some profit out following yesterday’s disappointing manufacturing data, and ahead of the US NFP data release.  Today’s job report will be crucial as it should provide investors with more hints on whether the Fed can really slow the pace of future rate hikes, or not. Today’s number is expected to show less job creation than the month before with 200K vs 261K in October, and any figure outside of that range should significantly impact market sentiment for the end of the year. The wait-and-see trading stance prevails so far on stocks, and investors know they will need further evidence of an increased probability of a soft landing in the US, before sending equities to new highs.

The worst performance comes from London this morning, as the FTSE-100 is currently testing its short-term dynamic bullish trendline above 7,500.0pts. A rebound over this zone should quickly send the market higher towards 7,615.0pts, 7,650.0pts and even 7,700.0pts by extension, while a break-out of the trendline could lead prices lower around 7,500.0pts and 7,400.0pts in the very short-term.

Pierre Veyret– Technical analyst, ActivTrades 


Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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