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Nonfarm Payrolls in the US are forecast to increase by 200,000 in October. Gold is likely to react slightly stronger to a disappointing jobs report than an upbeat one. Gold price action has no historical apparent connection with NFP deviation four hours after the data release.
The US Dollar Index looks forward to recording biggest weekly gain in seven despite recent market inaction. The Hawkish Federal Reserve, in addition to the prevalent risk aversion and the stronger US Treasury yields do certainly favor the uptrend.
On the other hand, hot inflation expectations and mixed data failed to intimidate the dollar buyers. Strong NFP could be necessary for bulls to maintain the lead. US Dollar Index (DXY) bulls take a breather around the highest levels in three weeks ahead of the all-important US Nonfarm Payrolls on Friday.
Even so, the dollar’s gauge versus the six major currencies is getting prepared for the biggest weekly jump in seven, also eyeing to snap a two-week downtrend, as it takes rounds to 113.00 by the press time.
Hawkish updates by the Fed currently constitute the most significant catalyst that propelled the DXY of late. Adding strength to the upside momentum were several recent fears originating from China, North Korea and Russia, as well as the firmer US Treasury yields.
In doing so, the US Dollar Index paid almost no attention to the mixed US data and downbeat inflation expectations. US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings.
US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.
On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve data, dropped to the lowest levels since October 19 and 13 in that order.
Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. That said, the S&P 500 Futures print mild losses while the yields are sidelined at the latest.
Looking forward, DXY may witness further grinding amid a lack of major data/events ahead of the US employment report for October. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move in case of a surprise.
Unless declining back below the 21-DMA immediate support near 112.15, the US Dollar Index is likely approaching the five-week-old resistance line, close to 113.50 at the latest.
