- The US Dollar Index (DXY) is registering slight increases, posing a threat to the 20-day SMA near 104.00.
- November ADP employment change was lower than expected; Unit labor costs were revised downwards.
- US yields are falling, limiting the dollar’s gains.
The Dollar Index (DXY) continues to rise, trading at 104.00 and approaching the 20-day SMA, despite weaker Automatic Data Processing (ADP) employment numbers, and consolidating its weekly gains. Attention remains focused on the non-farm payrolls report, as investors will get a clearer picture of the labor market to continue placing their bets on the next decisions of the Federal Reserve (Fed).
Mixed labor market data and cooling inflation signal a potentially dovish stance from the Fed, although officials do not rule out further tightening. This conjecture suggests a cautious but flexible approach to its monetary policy, so incoming data is closely monitored. Labor market data to be published on Friday will influence expectations about the Fed’s decisions, which could impact the dynamics of Dollar prices.
Daily Market Movements: US Dollar Holds Firm Despite Weak Labor Market Figures
- The US Dollar is trading with gains and surpasses the 20-day SMA at 104.00.
- The Unit Labor Cost for the third quarter was revised to -1.2%, while the November ADP employment change was lower than expected at 103,000, falling short of the estimate of 130,000.
- Investors are awaiting major economic reports due out on Friday. November nonfarm payrolls, unemployment rate and average hourly earnings will be closely monitored.
- US bond yields are falling. The 2, 5 and 10-year yields stand at 4.59%, 4.11% and 4.11%, respectively, which limits the dollar’s upward force.
- Market expectations are leaning towards a no-hike decision at the Fed’s December meeting, while possible rate cuts are also projected for mid-2024, according to CME’s FedWatch tool.
Technical Analysis: US Dollar shows bullish resistance and surpasses 20-day SMA
The relative strength index (RSI) shows a favorable bias, with a positive slope despite being in negative territory. This buying momentum is reinforced by the Moving Average Convergence Divergence (MACD), which is showing ascending green bars.
That said, the index is yet to consolidate above the 20-day SMA and is below the 100-day SMA, indicating strong selling forces in game. However, the bulls dominate the longer time horizon as the asset trades above the 200-day SMA.
Support Levels: 104.00 (20-day SMA), 103.60, 103.30, 103.15
Resistance levels: 104.10, 104.40 (100-day SMA), 104.50.
US Dollar FAQ
What is the US Dollar?
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions.
After World War II, the USD took over from the pound sterling as the world’s reserve currency.
How do the decisions of the Federal Reserve affect the Dollar?
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates.
When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
What is Quantitative Easing and how does it influence the Dollar?
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
What is quantitative tightening and how does it influence the US dollar?
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.