Dollar Nears Key Resistance Zone Ahead of Crucial Nonfarm Payrolls Report
The US dollar has experienced a significant rally since its August lows, increasing by over 3.5%. As it approaches fresh yearly highs, it's now facing a major resistance zone where the September and May 2024 swing highs meet this year's uptrend.
Michael Boutros, Senior Market Analyst at StoneX, notes that weekly momentum has reached its highest level of the year, making a break above this range crucial for maintaining bullish momentum. A daily close above the resistance zone would validate the next major leg of the US dollar advance.
However, a soft employment read in the upcoming U.S. nonfarm payrolls could curb expectations for the Federal Reserve's next rate move and potentially lead to a pullback. The labor report is now a critical event risk, as it arrives at the exact point where the US dollar either breaks through resistance or turns lower.
Boutros highlights that momentum remains in overbought territory, favoring the bulls for now. Nevertheless, Fed funds futures still price at least one more Federal Reserve rate move before the end of the year, indicating ongoing market expectations.