US Dollar Weakens Following Key US Data

The US Dollar weakened on Wednesday following the release of mixed economic data. While the ADP Employment Change report for September showed a stronger-than-expected increase in private sector payrolls, revising the previous month’s figure upward to 159,000 jobs, the downward revision to third-quarter GDP growth to 2.8% dampened investor sentiment. This growth figure, though still robust compared to global peers, fell short of market expectations.

The mixed economic signals have led investors to adjust their expectations for Federal Reserve monetary policy. Market participants are now pricing in a 25 basis point interest rate cut at the upcoming Fed meeting. This shift in rate expectations has contributed to the decline in the US Dollar, as lower interest rates tend to weaken a currency.

The looming Nonfarm Payrolls report on Friday is closely watched by market participants. A significant decline in job growth, as anticipated by many analysts, could further pressure the US Dollar. Such a scenario would reinforce the view that the US economy is slowing down and may necessitate additional monetary easing measures from the Federal Reserve.

Technically, the US Dollar Index (DXY) is currently consolidating and may test its 200-day Simple Moving Average (SMA) at 103.50. While the Relative Strength Index (RSI) suggests overbought conditions, the Moving Average Convergence Divergence (MACD) indicates weakening momentum. Support levels for the DXY are at 104.50, 104.30, and 104.00, while resistance levels are at 104.70, 104.90, and 105.00.