While waiting for federal employees to return to work, investors have turned to the private sector to get the best possible estimate of the state of the US economy. The ADP employment survey reported 42,000 net jobs created in October, compared with 30,000 expected, a sign that the labor market is stabilizing. At the same time, the services PMI index remains in expansionary territory at 54.8, although slightly below expectations, while the ISM services index came in at 52.40, against an anticipated 50.80. A similar trend can be seen in Europe (eurozone and the UK) and Asia, which has had the effect of supporting bond yields, indirectly favoring the dollar.
Technically, the dollar index is at a crossroads. It is currently testing the neckline of a potential double bottom reversal pattern. A break above 100.25 should pave the way for a continuation of the rebound that has been underway since mid-September towards 104.00/85. It should be noted that the RSI has moved out of its oversold zone and is pointing to an uptrend.
Source: Bloomberg
At the same time, the EUR/USD is still holding above 1.1500/1480, a critical level for confirming a significant decline towards 1.1065/50. The USD/JPY is stabilizing after hitting 154.15/50, while the USD/CHF has approached a resistance zone at 0.8130/55. In other words, if you want to bet on a decline in the dollar, this pair seems to be the ideal investment vehicle.
On the commodity currency side, the USD/CAD almost hit its target at 1.4150 before retreating, while the Aussie came back to test its support at 0.6440 for a new rebound. Only the kiwi remains negatively oriented: we will avoid getting in the way of the train that should take it towards 0.5505/5485.
