
Dollar Index Halts Losses at Key Support Amid Cooling Labor Market
Date: Wednesday, June 5, 2024
Wednesday Market Overview:
Asian equity markets rose on Wednesday, with European markets expected to follow suit ahead of key Purchasing Managers’ Index (PMI) reports from several Eurozone countries. Meanwhile, the Dollar Index has managed to recover some of its recent losses, finding support at a key level due to cooling labor market conditions, as evidenced by a slowdown in job creation in April to its lowest level in three years.
Technical Analysis:
On the four-hour chart, the Dollar Index’s recent downward movement has stalled at its long-term ascending trendline around the 104 level. The formation of a price floor at 103.970 suggests a consolidation phase, with the index currently trading between short-term support at 104.155 and resistance at 104.270. If buyers can push through the 104.270 resistance, this would complete a bullish reversal pattern known as a “failed swing,” which could propel further growth for the dollar. In this scenario, subsequent targets would be at 104.455, 104.570, and 104.755, assuming the bullish momentum continues. The index’s proximity to moving averages and key support, along with oscillators indicating a reversal from extreme levels, may signal the early stages of a potential price recovery.
Alternative Scenario:
If the resistance at 104.270 remains intact, the price is likely to oscillate within a sideways trend, with sellers focusing on supports at 104.155 and 103.970. A break below this latter support level would invalidate the bullish scenario, suggesting further downside potential.
Market Overview and Key Levels
Resistance Levels:
- Resistance 4: 104.755
- Resistance 3: 104.570
- Resistance 2: 104.455
- Resistance 1: 104.270
Current Price (at the time of analysis): 104.200
Support Levels:
- Support 1: 104.155
- Support 2: 103.970

Impactful Events:
Today’s key economic reports include the PMI data from Europe, the UK, and the US. These reports will be closely scrutinized as indicators of economic health and could significantly influence market sentiment. Additionally, the Bank of Canada meeting and the ADP Employment Report are in focus. These events are critical, as they will provide insights into monetary policy direction and labor market conditions, respectively.
Oscillators and Risk Warnings:
- RSI (Relative Strength Index): Bearish, indicating prevailing selling pressure.
- MACD (Moving Average Convergence Divergence): Bearish, supporting the downward trend.
- Moving Averages: Bearish, reflecting the recent negative price action.
Conclusion:
The Dollar Index’s ability to halt its recent losses at a critical support level amidst cooling labor market conditions highlights a potential turning point. Technically, a break above the 104.270 resistance could confirm a bullish reversal, targeting higher resistance levels. However, if this resistance holds, a sideways trend or further downside is possible.
Today’s PMI reports and other key economic events will be crucial in determining the index’s next moves. Investors should monitor these developments closely, as they will likely have significant implications for market dynamics. By keeping an eye on the outlined technical levels and broader economic indicators, traders can better navigate the current volatility in the market.