Dollar Extends Rally on Strong Jobs, EUR/USD Breaks February Low

Why It Matters

Stronger U.S. labor data and Fed hawkishness suggest tighter monetary policy longer, impacting currency valuations and capital flows worldwide.

Key Takeaways

• US jobless claims drop to 206k, beating forecasts
• Dollar gains against euro, breaking February low
• Fed minutes hint at possible rate hikes, delaying cuts
• Euro/USD slides below 1.1764 support, bearish bias
• RBA likely to keep May hike, labor market stays tight

Pulse Analysis

The latest US labor report showed initial jobless claims falling to 206,000, far below the 229,000 consensus, underscoring the resilience of the American employment market. Coupled with yesterday’s FOMC minutes that signaled a willingness to discuss further rate hikes, the data has reinforced expectations that the Federal Reserve will keep policy tight well into 2024. Traders have priced in a reduced probability of a rate cut in the first half of the year, prompting the greenback to rally across major currency pairs and lift the dollar index to a multi‑month high.

Euro‑dollar traders reacted sharply as EUR/USD pierced the 1.1764 support level, extending the pair’s decline to a February low of 1.1756. The break of the 55‑day exponential moving average signals renewed bearish momentum, with the next technical target near 1.1580. While the longer‑term 55‑week EMA still frames an overall uptrend from the 2022 trough, sustained trading below key moving averages could re‑classify the recent rally as a corrective wave. Consequently, euro‑centric assets face pressure as investors seek safety in the strengthening dollar.

Across the Pacific, the Reserve Bank of Australia posted a steady 4.1 % unemployment rate and solid job creation, keeping a May rate hike on the table. In the United Kingdom, BoE‑MPC member Catherine Mann warned that rising joblessness could temper the timing of a cut, even as inflation eases. Meanwhile, New Zealand’s RBNZ highlighted spare capacity, suggesting growth can coexist with disinflation and leaving its cash‑rate unchanged. These divergent central‑bank signals, combined with the dollar’s upward bias, are shaping a risk‑off environment that favours safe‑haven currencies and short‑duration assets.