Dollar drops after 6-day rally

The day before the release of the US employment report, greenback had the worst day in two weeks. Weak manufacturing data triggered a decline of the US dollar across the board, that ended lower for the first time in six days.

The US Dollar index, which gauges the US dollar against its main competitors, reached yesterday at 96.20 the highest level in three weeks. Today it rose to test those highs (peaked at 96.19) but it failed to raise further.

After the release of weak US manufacturing data it turned sharply to the downside and broke below 95.80. It bottomed at 95.54, the lowest since Tuesday’s Asian session and is about to end the day moving between 95.65 and 95.55, suffering the biggest decline since August 18.

The DXY has an important support around 95.30 (20-day moving average) while to the upside, above 96.20, the next key resistance could be seen around the 96.50 zone.

The decline of the USD  took place the day before the non-farm payroll report. The labor market remains a bright spot of the US economy. Market consensus points to a gain of 180K in NFP. A strong reading could boost Federal Reserve rate hike expectations and also the US dollar while a weak reading could push the US dollar further to the downside.