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USD: Dollar Index at Overbought Levels Ahead of ADP Report

US dollar index
US dollar index

The Dollar (DXY) is up ahead of the important US ADP employment report and is trying to reach its 2019 high of 99.68. However, the risk is high for dollar bulls as the price is near overbought levels, and yesterday’s poor ISM Manufacturing figures warn of a fast cooling US  economy.

It is difficult to use the ADP report to predict what may happen with the official Non-farm payrolls figures by the end of the week. However, one benefit of the ADP report is that it is less volatile than the NFP. The trend in the labor market is therefore easier to see in the ADP figures. Earlier in the year, the ADP employment change slid from 275K in May to 27K in June, followed by 102K in July. Eventually, the job-creating reached 195K but it is now anticipating to decline once again.

As for today’s reading, economists anticipate that the US labor market added 140,000 new jobs from 195,000 news jobs in the prior month. This figure should keep the unemployment rate stable at 3.7%, while a reading below 100,000 would suggest that the unemployment rate could tick-up on Friday.

The unemployment rate is important to watch as a trend of worsening unemployment rate tends to be matched by major high in the stock markets.

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[vc_single_image image=”14654″ img_size=”medium” alignment=”center” style=”vc_box_rounded” onclick=”custom_link” img_link_target=”_blank” link=”https://www.investingcube.com/q4-global-market-outlook-eurusd-gold-crude-oil-bitcoin-sp-500/”]The Dollar index (DXY) is trading above the upper blue trend line, meaning that the price is slightly overbought as the index has turned lower from around this line around seven times in 2019. Also, yesterday’s soft ISM figures hurt the short-term technical structure, and a slide below the September 30 low of 99.05, would place the index below the blue line and could send it to the median line at 98.40.

If the ADP figures beat expectations the Dollar index may remain above the September 30 low of 99.05, and the index might reach yesterday’s high of 99.68, followed by a test of the upper green line at 100. While a slide below the September 30 low might send the index lower as described above.

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