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US Dollar Index: $94 Target Remains Elusive After Non-Farm Payrolls Data

USDMXN Higher after Mexico Consumer Confidence beat Forecasts

Today is US Labor day, and what better way to kickstart the afternoon roll on this site than to talk about the response of the US Dollar Index to Friday’s Non-Farm Payrolls report. The US Dollar ended the week on bid but has pulled back somewhat this Monday as traders digest the jobs numbers. 

August 2020 Non-Farm Payrolls came in at 1371K versus the market consensus of 1375K, with a drop in the unemployment rate from 10.2% to 8.4%. On the surface, the numbers looked good, and the US Dollar benefitted from the sentiment it created. But this Monday, traders seem not so sure. According to Pantheon Macroeconomic’s Chief Economist Ian Shepherdson, delayed hiring for the ongoing US National Census was responsible for the majority of the 334,000 rise in government employment. 

Wednesday’s ADP employment number was a bad one, indicating that private sector employment had slowed significantly. Shepherdson believes it may take at least ten months for US private sector employment to recover to pre-pandemic levels. 

Other US fundamentals remain mixed. US markets are closed today, but the US indices ended last week in the red after hefty selloffs on Thursday and Friday. This leaves the USD Index a bit undecided as to its future direction, as is depicted by today’s doji candle. 

Technical Outlook for USD Index

The correction of the divergence continues into the 5th day, but the upside seems to have stalled at the upper channel border’s intersection with the 93.17 resistance. This level has to give way to bullish pressure for 93.80 to come into play as the next target to the north. Beyond this level, 94.62 and 95.19 constitute additional levels of resistance. 

Failure to break above 93.17 could produce a pullback that could set its eyes to the channel’s trendline. This move will have to contend with the 92.50 support, with 91.91 constituting another barrier to the downside below 92.50. 

USD Index Daily Chart