Title: U.S. Dollar Weakens Following JOLTS Data: Impact on Major Currency Pairs
By Alexander Kuptsikevich
Original article published on FXEmpire.com
The U.S. dollar experienced a pullback after the latest Job Openings and Labor Turnover Survey (JOLTS) data showed a surprising decline in job openings, fostering renewed expectations that the Federal Reserve may lean toward cutting interest rates sooner than previously expected. The weakening greenback impacted major currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
This article provides a comprehensive breakdown of market reactions to the JOLTS data, technical analysis of major currency pairs, and broader macroeconomic context to understand what this could mean for forex traders in the near term.
Key Economic Data: A Closer Look at the JOLTS Report
The JOLTS report, released by the U.S. Bureau of Labor Statistics, indicated that job openings declined to 8.06 million in April, the lowest since 2021 and well below market expectations of 8.38 million. This unexpected decrease raised concerns about slowing labor demand and a potential easing of inflationary pressures.
Highlights from the JOLTS report:
– Total job openings fell by 296,000 in April
– The job openings rate decreased to 4.8 percent
– Hirings dropped to 5.64 million, while total separations were little changed at 5.37 million
– Voluntary quits rose slightly, indicating some worker confidence, but remained well below 2022 highs
The market interpreted the drop in job vacancies as a signal that the U.S. labor market may be cooling, providing the Federal Reserve with more leeway to consider interest rate cuts later in the year.
Market Expectations for Fed Rate Cuts Strengthen
The anticipation of a weakening labor market, coupled with soft economic indicators across other major data sets, has led traders to increase bets that the Fed could cut interest rates as early as September.
Fed funds futures, as tracked by the CME FedWatch Tool, show:
– A nearly 70 percent probability of a rate cut by September
– Two potential rate cuts by the end of 2024, up from just one projected a few weeks ago
Fed officials have been adamant that sustained progress toward the 2 percent inflation target is required before monetary easing begins, but the softer JOLTS data has reignited speculation that labor market slack may accelerate the timeline.
Technical Analysis: Reaction Across Major Currency Pairs
EUR/USD – Euro Gains Ground
The euro strengthened against the U.S. dollar following the JOLTS report, breaking above the 1.0880 level and extending its bullish momentum.
– Resistance: The next major resistance is at 1.0910, followed by 1.0950
– Support: Immediate support lies around 1.0845, the previous short-term resistance turned support
– RSI still below overbought at 65 on the daily chart, indicating room for further upside
– A break above 1.0950 could open the door to retest 1.10
The Eurozone’s own inflation data, showing a rise in May’s headline CPI to 2.6 percent year-on-year, further supported the euro as it challenged resistant levels amid narrowing monetary policy divergence between the ECB and Fed.
GBP/USD – Sterling Takes Advantage of Dollar Weakness
The British pound also benefited from the broad softening of the greenback, with GBP/USD rising to trade near the 1.2780 level.
– Resistance: The pair faces resistance at 1.2800, a psychological and technical level
– Support: First support is at 1.2720, followed by stronger support near 1.2660
– Bullish momentum persists with moving averages trending upward
– 50-day SMA recently crossed above the 200-day SMA, forming a golden cross
Sentiment around the pound has improved
Read more on USD/CAD trading.