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• Traders brace for a second day this week with the weekly jobless numbers.
• Traders are clueless about Friday’s NFP as ADP and ISM were mixed. 
• The US Dollar Index sinks below 107, though the rally is still intact. 

The US Dollar (USD) is turning very mixed this Thursday with several asset classes trying to claw back against the ferocious Greenback. After parts of the equity, commodity, and bond markets all reached yearly lows over the past week,  it does not come as a surprise that all these elements are up this Thursday. The ADP and Institute of Supply Management (ISM)  numbers from Wednesday took a fair bit of wind out of the sales of the US Dollar Index.

While traders are still trying to assess the data releases from Wednesday, the next batch of data ahead of Friday’s Nonfarm Payrolls are due. With the decline in the ADP Employment Change data, all eyes will be on the Initial Jobless Claims. Should that number be an upbeat surprise, expect to see the DXY start testing the support of the 2023 rally.
 

Daily digest: US Dollar starts to lose steam

• Near 11:30 GMT, the Challenger Job Cuts for September is due to come out. Previous data was for -75,151. No forecast is pencilled in this time. 
• At 12:30 GMT, the only real data points of importance for this Thursday are the Initial Jobless Claims and the Trade Balance. Initial Jobless Claims are expected to head from 204,000 to 210,000. The Continuing Claims are expected to head 1.67 million to 1.675 million. An uptick is thus already expected, though any bigger number might trigger some US Dollar weakness.
• For the Goods Trade Balance, a contraction is expected from -$65 billion to -$62.3 billion. 
• Fed speakers might shed some light in this turbulent week with the Fed’s Loretta Mester from Cleveland speaking at 13:00 GMT. At 15:30 GMT, Thomas Barking from Richmond is due to speak, followed by Mary Daly from San Francisco near 16:00 GMT. 
• Equities are bored with the constant sell-off and are trying to turn the tide with some green figures: Both the Nikkei and the Topix indices in Japan advanced nearly 2% on Thursday. China is as good as flat for this Thursday. European stocks are flat, and US futures are mildly in the red, less than 0.50%.
• The CME Group FedWatch Tool shows that markets are pricing in a 77% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. The earlier rise in probability for a hike is being erased again as both ISM and ADP on Wednesday were coming in under expectations and might signal that the economy is starting to struggle with these elevated rates. 
• The benchmark 10-year US Treasury yield is peaking at 4.74%, off the highs from 4.85% earlier in the week. 
   

US Dollar Index technical analysis: Failing its first test

The US Dollar Index is under pressure as traders are no longer awarding the Greenback for growing economic indicators when they are contracting against the previous print. Traders are starting to embrace the idea that the extensive growth cycle for the US might be nearing its end and is over its peak. That could translate into a substantially weaker US Dollar Index (DX), which might start to break down as more data points are issued in the coming days and weeks. 

The US Dollar Index opened around 106.77, though the overheated Relative Strength Index (RSI) is acting as a cap that it is trading in an overbought regime. With 107.19 – the high of November 30, 2022 –  tested on Wednesday, it will be important to see if DXY can get a daily close above that level. If that is the case, 109.30 is the next level to watch. 

On the downside, the recent resistance at 105.88 should be seen as first support. Still, that barrier has just been broken to the upside, so it isn’t likely to be strong. Instead, look for 105.12 to do the trick and keep the DXY above 105.00.

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