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How is the USD Index Responding to This Week’s Jobless Claims?

The USD Index has had a mild bullish response to the latest consignment of the Initial Jobless Claims data. According to the US Department of Labor, the Initial Jobless Claims for the week ended October 3, 2020 fell marginally from 849K (revised upwards) to 840K, in a move which did not meet the market expectations. This explains the muted bullish response, which shows that the market is encouraged, but not by much.

A breakdown of the data also showed that the 4-week moving average continued its steady decline, as it came in at 857K. This number represents a drop by 13.25K from the previous week’s average. In terms of the advance number for continuous jobless claims (seasonally adjusted insured unemployment), there was a decrease of 1,003K from the week that preceded the week ended September 26, bringing the number to 10,976K. Seasonally adjusted insured unemployment rate (advance) also dropped by 0.7% to 7.5, for the week ending September 26. 

Technical Outlook for US Dollar Index

Ever since price made the bounce from the rounding bottom’s support arc, there has been a progressive upside-pullback-upside move on the US Dollar index. This move resulted in the breakout of the pattern, which met resistance at the 94.62 price level (previous low of March 9 2020). Since then, price has pulled back to the rounding bottom’s neckline, but attempts at re-entering the pattern were solidly rebuffed last week. So far, the US Dollar index has traded in the range that exists between the neckline and the 93.80 resistance target. This resistance has capped the upside move on the DXY this Thursday.

A breakout of the 93.80 resistance is required to re-establish the upside push, which targets 94.62 initially and may extend to 95.19 if bulls are aggressive in their push. 

Conversely, failure to breakdown the 93.80 resistance may lead to an extended period of range-trading, which may descend into a decline if the neckline of the pattern gives way. This opens the door towards 93.17, with 92.50 and 91.91 lining up as potential support targets if the decline is extensive. 

USD Index Daily Chart