DXY: what to expect from labor market data?

Despite the low activity of traders on the eve of the publication (at 12:30 GMT) of the US Department of Labor report with monthly data on the labor market, the dollar still managed to slightly strengthen in the first half of today's trading day.

At the time of this article's publication, futures for the DXY dollar index were traded near 105.81, 98 points above the local low of 104.92 hit earlier this week.

As we have already noted, today the focus of investors will be the report of the US Department of Labor with monthly data on the labor market. Economists forecast a slowdown in the rate of new jobs (non-agricultural) in July, to 250,000 from 372,000 in June, although the unemployment rate is likely to remain at the same level of 3.6%.

Data on the state of the labor market (along with data on GDP and inflation) are key for the Fed in determining the parameters of the current monetary policy. In general, these are still good indicators.

However, the US Department of Labor's weekly report released yesterday suggests a more negative monthly report, pointing to an increase in jobless claims. Thus, the number of initial applications increased to 260 thousand (previous values: 256 thousand, 251 thousand, 244 thousand, 235 thousand, 231 thousand, 232 thousand, 202 thousand, 211 thousand), and repeated to 1416 thousand (previous values: 1359 thousand, 1384 thousand, 1333 thousand, 1372 thousand, 1324 thousand, 1331 thousand, 1309 thousand, 1309 thousand). The data speaks of a growing trend in the number of unemployed, and this is an extremely negative factor for the dollar, which also speaks of a general deterioration in the situation in the American economy. So far, the labor market remains a bright spot in a generally deteriorating background. If the situation continues to deteriorate here, and if labor market data turns out to be worse than forecast, then the Fed will have less room to maneuver in planning its monetary policy parameters and more arguments in favor of taking a pause in the interest rate growth cycle. If the Fed leaders announce the resumption of stimulus, which is also not ruled out if the situation in the US economy worsens, then a new cycle of the dollar's fall cannot be avoided.

Breakdown of the local minimum at 104.92 will create the prerequisites for a further decline in DXY. In an alternative scenario, and in the event of a resumption of the growth of the dollar, the first signals for the resumption of long positions in DXY futures will be the breakdown of the local resistance levels 106.00, 107.00.