Further U.S. Dollar Gains Ahead?

We have entered the final quarter of the year and following last month when global stocks posted their worst performance since March 2020, the fourth quarter could be the most uncertain environment of 2021. One of the market’s main concerns is elevated inflation and after Friday’s PCE report for August came in higher-than-expected, markets could be increasing Federal Reserve rate hike bets.

This week, all eyes turn to the U.S. Nonfarm payrolls report on Friday. Economists expect a job gain of 470k in September while hourly earnings are expected to come in hotter-than expected at 4.6 percent y/y from 4.3 percent prior. If these forecasts turn out to be correct, the U.S. dollar could further appreciate. A materially lower outcome could derail the Fed from its less-dovish policy path.

Before coming to Friday’s payrolls report, we will keep tabs on the technical picture.

EUR/USD

In short-term time frames we focus on the 1.1580-support on the downside and the 1.1620-resistance on the upside. If the euro drops below 1.1580, we anticipate further losses with a next bearish target at 1.15. If the euro, however, climbs above 1.1620 we could see a test of 1.1660.

GBP/USD: Remaining below 1.36 we expect further losses towards 1.3350.

DAX: Friday’s dip below the crucial 15000-mark proved short-lived – at least until today. As long as the index fluctuates below 15650, we favor bearish movements with a next lower target at 14900. A break below 14800 could generate an even stronger sell signal towards 14400. For a bullish breakout on the other side, we would need to see prices above 15650.