Non-agricultural data ultra-weak, dollar index down test 92 support

After the release of non-agricultural employment data on Friday (September 3), the US dollar index fell below the support level of 92.00. U.S. 10-year Treasury bond yields rebounded to a daily high near 1.33%. In August, the US economy "only" added 235,000 jobs.


After the heavy non-agricultural report was released, the index accelerated the downward trend and briefly tested the area below 92.00 on Friday, after the non-agricultural employment data unexpectedly upset in August. In fact, the U.S. economy added 235,000 jobs last month, which was far below the 750,000 expected by the market. The July data of 943,000 was revised up to 1.053 million.

On the optimistic side, the unemployment rate has fallen to 5.2%, the average hourly wage has increased by 0.6% per month, and the annual rate has increased by 4.3%. All data are better than previously expected. On the contrary, the participation rate remained unchanged at 61.7%.

The decline in the US dollar index is in contrast to the rebound in the yield of the US 10-year Treasury bond in the 1.33% region, which previously broke through the consolidation range around 1.30%.

The possibility that the Fed may announce at its September meeting to start reducing its bond purchases has now been hit, and market participants may begin to speculate that it may be announced at the November or December meeting.

After the August non-agricultural announcement, federal funds futures hinted that the market believes that the Fed will raise interest rates by 25 basis points at the December 2022 meeting.

Specifically, the market believes that the probability that the Fed will raise interest rates once (25 basis points) at the December 2022 meeting is 65.6%, and 72.6% before the data is released. If there is no interest rate hike at the December meeting in 2022, it will be in February 2023. The probability of raising interest rates once (25 basis points) at the meeting was 74.9%, compared with 83% before the data was released.

The Wall Street Journal commented on U.S. non-agricultural employment data: Weak non-agricultural data will almost certainly hinder the Fed’s debt reduction. Last week, Fed Vice Chairman Clarida said that if jobs continue to increase by about 800,000, the scale may be reduced before the end of the year. The Fed Governor Waller said that adding another 850,000 jobs can reduce debt; for the time being, the current obstacles to the September debt reduction plan are quite insurmountable, but given people’s ability to stimulate asset purchases With doubts and concerns about the impact of the bond purchase plan on financial risk-taking, some Fed officials may continue to emphasize debt reduction.

At present, the US dollar index is hovering near 92. The next support level is the intraday low of 91.94, followed by the status of 91.78 on July 30, and finally the 100-day moving average 91.63. On the other hand, breaking through the 50-day moving average of 92.60 will open the door to the high of 93.18 on August 27 and the high of 93.73 on August 20.

(Daily chart of the US dollar index)