- The US dollar index is under pressure ahead of the initial jobless claims data.
- Analysts polled by Bloomberg expect that more than 1.4 million Americans filed for jobless claims.
- The data will come a day ahead of the official July nonfarm payrolls numbers from the US.
The US dollar index (DXY) is under pressure as investors wait for the initial jobless claims data that will come out later today. The index is trading at 92.73, which is close to its lowest level since May 2018.
US jobless claims data eyed
The Bureau of Labour Statistics (BLS) will release the initial jobless claims numbers later today. Economists polled by Bloomberg expect that more than 1.42 million Americans filed for initial jobless claims in the previous week.
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That will be a modest drop from the 1.43 million people who filed for initial claims in the week before. In total, more than 54 million Americans have filed for unemployment claims since the pandemic started. The claims have increased in the past consecutive two weeks.
The jobless claims data will come at a time when Democrats and Republicans in congress are debating on the next phase of stimulus package. Republicans have proposed lowering the weekly $600 cheque to $200, a suggestion that Democrats have rebuffed.
The data will come a day before the bureau is set to release the official July employment numbers. Economists polled by Reuters expect that the economy added more than 1.6 million jobs in July. They also expect that the unemployment rate declined from 11.1% to 10.5%. In a statement, a Credit Suisse analyst said:
“Initial claims have remained stubbornly high and the number of individuals receiving unemployment insurance has barely declined from its peak.”
However, with more states rolling back their reopening plans, there is a possibility that the economy added fewer jobs. Yesterday, a report by ADP showed that private employers employed just 167k people in July. That was significantly below the 1.5 million that analysts were expecting.
US data sending mixed signals
Today, the US dollar index is reacting to mixed signals about the US economy. Yesterday, data from the government showed that the country exported goods worth more than $157 billion in July. That was better than the $144 billion it exported in the previous month.
In the same month, the country imported goods worth more than $208 billion after exporting goods worth $199 billion in the previous month. As a result, the trade deficit declined from the previous $54 billion to $50 billion.
Meanwhile, data from Markit and ISM showed that the services sector rebounded in July. The services PMI rose from the previous 47.9 to 50.3, slightly higher than the 50.0 that analysts were expecting. The ISM non-manufacturing PMI rose from the previous 57.1 to 58.1. On Monday, PMI numbers from ISM showed that the manufacturing sector had continued to flourish.
US dollar index technical outlook
The daily chart shows that the US dollar index has been in a steep downward trend in the past few weeks. The index is trading at its lowest level in more than two years. Also, the index is below the short, medium, and long-term moving averages. The RSI has moved to the oversold level of 22. Therefore, I suspect that the downward trend will continue as bears attempt to move to the next support at 92.