What to expect from DXY after the US Employment Data Release?

The US labour market is at historical maximal levels, but the upcoming employment data release will be enough to strengthen to the Greenback? In this post, we’ll review what the analysts’ expectation is, and we’ll analyse what could be the next path from DXY.

The US employment context

The US labour market continues showing strength signals. In April, the unemployment rate fell to 3.6%, the lowest level since December 1969. The analysts’ don’t expect changes for May.

source: tradingeconomics.com

The nonfarm payrolls soared to 263K in April, surpassing the 189K jobs reported in March. For May, the analysts’ consensus expects an increase of 185K new jobs.

source: tradingeconomics.com

The US Dollar Index scenario

The big picture in the US Dollar Index (DXY) shows an ending pattern of the bullish cycle started in Feb. 2018. The first scenario corresponds to a limited upside with a potential target at 98.61. After this move, the Greenback could start a bearish cycle. The second scenario considers the breakdown and closes below the 96.78 level. If this occurs, the DXY could drop to September 2018 lows.

The summary

The trend of the US labour market in the last months shows robust growth. Despite this context, we have to consider the Fed’s Chairman Jerome Powell speech. The Fed may cut the interest rate by July if trade tensions continue.

In the technical side, the critical level to keep under control is 96.78. The close below this level should be indicative of more drops for the US Dollar index. The upside is limited until the 98.61, from where the price should start a long-term bearish cycle.

Remember that the price is not forced to move as our outlook proposes. The chart released corresponds to an Elliott Wave Analysis application.