The middle of this week, was expected to bring about high volatility in the markets suddenly. But the truth of the matter is that it is showing extreme fragility and uncertainty with price movements and factors affecting it. Investors are trying to tune into any kind of signals that would reflect the policy of the Federal Reserve (Fed). In fact, markets are picking up some signals that were considered with low relevance before.
Summer complacency was suddenly interrupted by worse July unemployment data compiled by ADP. Even though it is not official data, only 330,000 new jobs were created when the number was expected to come to 659,000. This was shocking for investors and rolled the U.S. Dollar index to 91.8 points from 92.2 points in the beginning of the week.
However, an unexpected support for the Dollar came just within an hour as Richard Clarida, a Vice Chairman of the Federal Reserve, said that the central bank is likely to hit its economic targets by the end of next year and start raising rates again in 2023. This was completely unexpected and it seemed to inspire the Greenback bulls to restore positions of the Dollar. They started to buy the Dollar even with a greater enthusiasm that was present during a sell-off. The U.S. Dollar index swiftly returned to 92.3 points. Eventually, nothing changed as the Dollar is still hovering in its previous technical trading range of 91.8-92.3 points that has been established since the end of July.
So, messages that were send to the market are conflicting and contrary. The uncertainty has increased, preventing investors to move in either direction. Technically it is sideways movements picture with a trading range with sharp spikes and high amplitude.
To breakout from such a range, additional strong drivers are needed, and the Non-Farm Payrolls report that will be released this Friday could well be one of them. Technically, if the Dollar index (DXY) breaks through the 92.3 points level it may mean further rise of the index to July highs at 93.0-93.2 points. Alternatively, if the index slips below 91.8 points that may lead to a decline to 91.5 points.
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