Will Non-Farm Payrolls Further Weigh on the Dollar?

Summary:

Recent US economic data has been lackluster, with ADP employment figures falling short of expectations. If today's non-farm payrolls report underperforms expectations, it could lead to further declines in the US dollar.

SELL USDX

Close Time

CLOSED

98.950

Entry Price

96.900

100.500

99.180 +0.290 +0.29%

48.0

Pips

Profit

96.900

98.470

Exit Price

98.950

Entry Price

100.500

Fundamentals

The US economy is currently mired in a classic stagflation trap characterized by "low growth + high inflation." The May ADP employment report showed an increase of only 37,000 jobs, the lowest since March 2023. The ISM Services PMI fell below the 50-mark to 49.9, indicating a contraction in economic activity. However, the Prices Paid Index soared to a 30-month high, highlighting the increasing pressure on businesses to pass on costs. This contradiction has left the Federal Reserve in a policy dilemma—cutting rates could fuel inflation, while maintaining high interest rates could accelerate economic recession.

More critically, the Trump administration has proposed eliminating the debt ceiling, attempting to ease short-term pressures through unconstrained fiscal expansion. The US national debt has already climbed to $36.94 trillion. If this policy is implemented, the deficit could expand by $3.6 trillion over the next decade, which will significantly increase the risk of debt default. After Moody's downgraded the US credit rating, global central banks accelerated the reduction of US dollar assets, dealing a systemic blow to the dollar's status as a reserve currency. The share of renminbi (RMB) settlements rose to 4.99%, and Middle Eastern oil-producing countries are shifting towards RMB trade settlements. This policy not only weakens the dollar's credibility but also triggers market panic over "fiscal dominance of currency"—as the White House sacrifices long-term stability for short-term stimulus, the foundation of the dollar as a store of value is being eroded.

It is worth noting that the US will release its May non-farm payrolls data later today. If the data underperforms expectations, it will further weigh on the already weak US dollar.

Technical Analysis

From the daily chart perspective, the candlestick structure of the US Dollar Index has formed a head-and-shoulders top pattern, with the neckline at 99.10 already breached. This opens up further downside potential for the index, with the first target potentially falling to 96.60.

In terms of technical indicators, the daily MACD's fast and slow lines have formed a death cross, and the RSI is around 43, not yet in the oversold territory. This suggests that market sentiment remains bearish, with strong selling pressure still in place.

In conclusion, traders are advised to focus on shorting rallies.

Trading Recommendations

Trading Direction: Sell

Entry Price: 99.00

Target Price: 96.90

Stop Loss: 100.50

Deadline: June 20, 2025, 23:00:00

Support: 98.26/97.64

Resistance: 100.38/101.77

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