**Did Friday Mark a Market Top? Analyzing the US Dollar and Major Currency Reactions**
*By: Ken Chigbo (original source: FXStreet)*
*Extended and adapted version with supplementary market insights*
The U.S. dollar soared on Friday, October 4, 2024, following the release of a much stronger-than-expected U.S. Nonfarm Payrolls (NFP) report, prompting speculation over whether the dollar rally had reached its peak. As investors and analysts parse the implications of the report for Federal Reserve policy, concerns have emerged as to whether this robust data marks a turning point for the U.S. dollar’s bullish trend.
In this in-depth analysis, we’ll evaluate what Friday’s price action reveals, how global currencies responded, what Fed policy could look like moving forward, and whether this explosive dollar surge is sustainable. The article is based on the original reporting by Ken Chigbo of FXStreet and incorporates additional insights from broader market data and analysis.
## Highlights from the U.S. Jobs Report on October 4, 2024
Markets were jolted when the U.S. Department of Labor reported job additions far exceeding expectations:
– **Nonfarm payrolls** surged by **336,000 jobs** in September, well ahead of economists’ forecasts of around **170,000**.
– **August figures were revised upward** to 227,000 from an initial estimate of 187,000.
– The **unemployment rate** held steady at **3.8%**.
– **Average hourly earnings** rose **0.2% month-over-month**, signaling modest wage inflation — a bit softer than expected.
These metrics painted a picture of strong labor demand and a resilient economy. They also fueled bets that the Federal Reserve will maintain a hawkish stance, continuing its campaign to suppress inflation through elevated interest rates.
## Market Reaction: Dollar Strength, Treasury Yields Surge
– **U.S. Treasury yields** soared following the report. The **10-year yield** broke above **4.8%**, touching levels last seen in 2007.
– The **U.S. Dollar Index (DXY)** spiked to a 2023 high near 107.34 post-release.
– **Gold prices fell** sharply, dropping under $1,820 per ounce, reflecting the surge in real yields and a stronger greenback.
– **Stock markets** experienced whipsaw action. Initially selling off, equities recovered later in the day, with the **S&P 500** turning higher as investors speculated that the wage growth figure might help tame Fed concerns about overheating.
## Did Friday Mark a Top in the Dollar?
While the dollar’s explosive move last Friday underscored a strong economic narrative, analysts are now debating whether this move presents a climax of the dollar’s recent rally.
Points supporting the idea of a potential top:
– **Overbought momentum** on multiple technical charts, including RSI levels on the DXY and major USD pairs, suggests potential exhaustion.
– **Market positioning** in futures markets shows extremely bullish bets on the dollar, increasing the risk of a reversal due to overcrowded trades.
– **Long-term resistance levels** on several major pairs may act as barriers to further dollar strength.
– The **Federal Reserve may have limited room** for additional tightening without triggering a sharper economic downturn.
However, counterpoints argue that we may not have seen the top yet:
– The U.S. continues to demonstrate relative economic strength compared to its global counterparts.
– The sustained rise in bond yields supports the dollar via widening yield differentials.
– The labor market remains historically strong, and inflation pressures, while moderating, are still higher than historical averages — potentially keeping the Fed in hawkish territory into 2025.
## Technical Levels to Watch on the DXY
– **Support Zones**:
– 106.50: Near-term support
– 105.60: Former resistance turned
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