U.S. Dollar (DXY) Gains Ground As Unemployment Rate Declines

Key Insights

• U.S. Unemployment Rate declined from 3.7% to 3.5%, providing significant support to the U.S. dollar.
• USD/JPY made an attempt to settle above the ultra-important 145 level. 
• GBP/USD tried to get below 1.1100.

U.S. Dollar Stays Strong Ahead Of The Weekend

U.S. dollar gained upside momentum after the U.S. released Non Farm Payrolls and Unemployment Rate reports.

The Non Farm Payrolls report indicated that the economy added 263,000 jobs in September, compared to analyst consensus of 250,000. Unemployment Rate declined from 3.7% in August to 3.5% in September, while analysts expected that it would remain unchanged.

The surprising decline of the Unemployment Rate provided significant support to the American currency. Low Unemployment Rate will force the Fed to raise the rate aggressively in order to fight inflation.

Meanwhile, the yield of 10-year Treasuries moved towards the 3.90% level. A move above 3.90% will push the yield of 10-year Treasuries towards the yearly highs at 4.00%, which will be bullish for the U.S. dollar.

EUR/USD Remains Under Pressure

EUR/USD declined towards 0.9750 after the release of job market data from the U.S. Today, traders also had a chance to take a look at the latest economic data from Germany.

Germany’s Industrial Production declined by 0.8% month-over-month in August, compared to analyst consensus of -0.5%. Retail Sales decreased by 4.3% year-over-year, in line with the analyst consensus. Economic reports from Germany highlighted the negative impact of the energy crisis on Europe’s leading economy.

Currently, EUR/USD is trying to settle below the support at 0.9725. In case this attempt is successful, EUR/USD will move towards the next support level, which is located at 0.9670. A move below this level will open the way to the test of the next support at 0.9635.

On the upside, the previous support level at 0.9810 will serve as the first resistance level for EUR/USD. In case EUR/USD climbs back above this level, it will head towards the next resistance at the 20 EMA at 0.9850. A successful test of this level will push EUR/USD towards the resistance at 0.9910.

GBP/USD Tests The 1.1100 Level

GBP/USD has recently made an attempt to settle below the 1.1100 level as the British pound remained under pressure.

Today’s Halifax House Price Index report indicated that house prices declined by 0.1% month-over-month in September.

The report showed that higher interest rates have started to put pressure on the housing market. The potential problems on this front may put more pressure on the UK economy and the British pound in the upcoming months.

Commodity-Related Currencies Move Closer To Yearly Lows

AUD/USD declined below 0.6400 while NZD/USD settled below 0.5650 as the U.S. dollar received additional support after the release of the job market reports.

Meanwhile, USD/CAD faced some resistance at 1.3750 as WTI oil made an attempt to settle above the $90 level.

Most likely, commodity-related currencies will remain under pressure in case Treasury yields continue to move higher.

USD/JPY Tests The Key Resistance At 145

USD/JPY has finally made an attempt to settle above the resistance level at 145 but failed to settle above 145.35 and pulled back.

This attempt is the first serious test after a period of consolidation. The key question is whether the BoJ is ready to intervene if the test is successful and USD/JPY moves towards the 146 level.

For a look at all of today’s economic events, check out our economic calendar.