The dollar index is holding within a narrow range, in a quieted pre-NFP mode on Friday morning, but remains at the back foot following 0.5% drop previous day, which generated initial negative signal on close below bull-channel support line (106.08) also near Fibo 23.6% retracement of 99.87/108.04 uptrend.
Fresh bears found footstep just above next pivotal supports at 105.65/57 (daily Kijun-sen / Nov 27 higher low) and expected to remain in play while holding above these levels.
Technical studies on daily chart are mixed, as MA’s hold in a mixed mode (10/20 DMA bear cross vs 55/200 DMA golden cross, while 14-d momentum is heading north but still in the negative territory.
Bearish scenario would require firm break of 105.65/57 pivots to complete a failure swing pattern on daily chart and open way for deeper fall (150 zone marks next strong supports), while stronger bounce and possible weekly close within the bull channel, would signal another downside rejection and possible formation of a double bottom.
The dollar is looking for fresh direction signal from release of US Nov labor report today, with NFP expected to increase by 200K, following Oct slump to 12K (which is seen as temporary phenomenon, sparked by hurricane and strike of Boeing employees).
Average earnings are forecasted for 0.3% rise vs 0.4% rise previous month, while inflation in November is expected to tick higher to 4.2% from 4.1% in October.
Overall, the data suggest a healthy easing in the US labor sector that adds support to Fed’s signals for 25 basis point rate cut in the next policy meeting.
On the other hand, any significant NFP divergence from forecasted levels would generate stronger direction signals, with dollar to receive fresh boost on upside surprise and come under more pressure in November NFP disappoints.
Res: 106.10; 106.24; 106.71; 107.00.
Sup: 105.57; 105.00; 104.50; 104.08.
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