The US dollar rallied higher in Monday’s trading session. This uptick was on positive signs that the world’s largest economy was recovering as seen by the recent US Jobs report released.
At the time this report was drafted the US dollar index that is used to track the greenback against major global currencies, was up 0.20% to trade at 92.907. Currency trading will likely experience low volatility as US financial markets are closed for the Labour Day holiday.
Quick fact: The US Dollar Index tracks the American dollar against other major currencies such as the Japanese Yen, British Pound Sterling, Swedish Krona, the Euro, and more. Individuals hoping to meet foreign exchange payment obligations, via dollar transactions to European countries, and Japan, would need fewer US dollars in meeting such obligations.
Why the US dollar is rally higher: In spite of the world’s largest economy having a surge in COVID-19 caseloads, forex traders believe that the US dollar index is showing an oversold signal, meaning that any time the value of the safe-haven currency drops below the 92.250 support level, traders increase their long positions.
Also, it should be noted that the United States in recent weeks, has been printing impressive economic data including the recent US Jobs report showing unemployment fell to 8.4%; this crucial macro tells forex traders that the worst of the COVID-19 onslaught is definitely over.
Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics, spoke about the low market volatility and macros expected at the currency markets, as the US financial markets remain closed for the holidays. He said;
“In the short-term, more so with US markets closed today, it should remain an extremely choppy affair, with bounces likely being sold by design.
“That said, it will be interesting to see whether value can hold up on a relative basis, with the nature of any further tech sell-off, albeit orderly vs. disorderly likely deciding the playing field today.”