Forex:Dollar smiles as NFP smashes expectations

The Dollar flickered to life on Friday afternoon after Nonfarm Payrolls (NFP) increased by…

The Dollar flickered to life on Friday afternoon after Nonfarm Payrolls (NFP) increased by a solid 2.5 million in May, smashing the market expectations of -8 million.

The unemployment rate also offered by a pleasant surprise by dropping -13.3% compared the -20% forecast while average hourly earnings came in at -1% month-on-month, below the 1% estimate. Overall, the jobs report is certainly encouraging and suggests that the largest economy in the world is trying to get back on its feet. However, this optimism may be squashed by over the coming weeks if economic data continues to disappoint. Is the worst of the coronavirus choas behind us? Time will tell.

All in all, this surprisingly solid jobs report may lower the chances of the Federal Reserve taking any further action. The absence of looser monetary policy could instil Dollar bulls with fresh inspiration, especially if macroeconomic conditions shows signs of stabilizing.

Looking at the charts, the Dollar Index has the potential to rebound towards 97.80 in the week ahead as sentiment towards the US economy improves. However, the technical outlook remains in favour of bears as prices remain below the 20 Simple Moving Average while the Moving Average Convergence Divergence points to further downside. Should 97.80 prove to be reliable resistance, prices may end up sink back towards 96.25.

But if the fundamental support king Dollar, a move back towards 97.80 could open the gates to 98.50.


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