The dollar manages to ignore the strengthening of doves in the Fed

The dollar manages to ignore the strengthening of doves in the Fed

Labour market statistics, which sharply reversed market sentiment at the end of last week, interrupted the dollar's initial rise. Modest growth in July employment and a downward revision of 258,000 in the May-June data convinced investors that the economy was cooling. Derivatives increased the chances of the Fed easing monetary policy in September from 20% to 90%, taking 2% off the dollar index.

Donald Trump's dismissal of the head of the Bureau of Labour Statistics for allegedly falsifying data added fuel to the fire of the US dollar's rise against major world currencies. The White House is gaining more and more power. Trump has nominated his economic adviser, Stephen Miran, to the Fed. This is a temporary position until 31 January 2026. If the Senate approves him, he will become the leading contender for the position of Fed chairman. He is a strong supporter of lowering interest rates. Powell's current term ends in May 2026, but rumours of his premature resignation are constantly circulating. On Thursday, Bloomberg named Christopher Waller as the leading contender to be the Fed chairman, but that was before Miran's nomination. If this continues, will the dove replace the eagle on the facade of the Fed building in Washington? In such conditions, investors are rightly demanding a higher risk premium from US assets.

All this news is digging a hole under the US dollar, into which it risks falling. But we are also looking at the technical component of the puzzle. The dollar index is testing the 50-day moving average again. However, this time it acts as support, although it has been acting as resistance since February. From April to June, the RSI on weekly timeframes was oversold, and now it has come out of it, which is often followed by a rebound. It would not be surprising if the DXY continues to swim against the tide, adding a couple of per cent next week to the 100 area from the current 98. Further growth will be a serious victory for the bulls if the fundamental background remains bearish.

By the FxPro Analyst Team