The January report gave investors an idea of the Federal Reserve's view on the labor market. The Federal Reserve believes that the labor market is stabilizing rather than deteriorating. The FOMC no longer views employment as a downside risk, reducing the urgency to cut interest rates. As a result, rates remained stable at 3.50-3.75%.
Instead, market expectations suggest an 82% chance of a rate cut at the next meeting on March 18. Investors appear to view the labor market as fragile and are closely watching the situation. Forecasts estimate that between 55,000 and 70,000 new jobs will be created in January, which would be an improvement compared to the previous 50,000. A better-than-expected jobs report could reduce the chances of a rate cut, providing support to the US dollar. The unemployment rate is expected to remain stable.
Conversely, if employment numbers fail to meet expectations, market anxiety may increase, increasing the likelihood of a rate cut on March 18 and putting downward pressure on the US dollar.
The technical analysis of the dollar index shows that the dollar has sold off against its peers, and the decline stopped near 95.50. Price action is consolidating between 96.00 and 98.00. The RSI has fallen from a neutral level of 50 to 39, indicating growing bearish momentum.
