US Dollar Index consolidates losses, headed toward lowest close since October

The US Dollar Index dropped sharply after the release of the US employment report. It fell from 97.20 to 96.58, hitting the lowest in seven months. During the American session, the greenback was unable to recover and is about to end the week in a range between 96.70 and 97.60. The index is headed toward the lowest daily close since October. 

According to the NFP, the US economy added 138K jobs in May, below market consensus of 185K. Previous months number were revised lower and the unemployment rate dropped to 4.3%, the lowest in 16 years (due to a decline in the labor force participation). 

US: Total nonfarm payroll employment increased by 138,000 in May

The numbers did not change expectations about the next FOMC meeting. According to the CME FedWatch Tool the odds of a rate hike on June 14 remain above 90%. 

In the bond market, US yields tumbled after the report sending the 10-year to 2.145%, a fresh 2017 low. The rally in Treasuries weakened the US dollar. 

Levels to watch 

Friday’s slide pushed the index below the 97.80 area that offered support during the last two weeks. A consolidation could open the doors for a continuation of the decline with possible targets at 96.25 (Sep high), 96.00 and 95.80/85 (intraday Nov low). If it regains 97.00 it could remove the bearish pressure, still, the main trend will continue to point to the downside.