On Thursday (September 4th), the US dollar index continued its short-term upward trend before the US market opened. This week's US employment data will be the main focus: Automatic Data Processing Inc. (ADP), the largest US payroll processor, will release its August employment figures at 8:15 PM on Thursday. This follows unexpectedly weak July non-farm payrolls (NFP) data, which triggered the reassignment of relevant Department of Labor officials and briefly sent the US dollar plummeting. With the September Federal Open Market Committee (FOMC) meeting approaching, this will be the last clue to employment data before the meeting, and the market is closely weighing its implications for the interest rate path.

Fundamentals:

The ADP report is given a higher weight this time for three reasons: First, the dislocated decline in the July NFP shattered the previously optimistic narrative of US economic resilience, forcing the market to shift its pricing from "inflation risk" to "slowing growth." Second, the US President's recent pressure on the Federal Reserve, publicly calling for a looser interest rate environment, has significantly increased the sensitivity of policy expectations to high-frequency data. Third, with the interest rate meeting approaching, any new evidence could shift the structure of the interest rate curve and the dollar's term premium. The current market consensus is 68,000 new jobs in August, down from 104,000 in the previous month. A weaker reading would reinforce the perception that downside risks outweigh inflation risks, shifting the probability of a 25 basis point rate cut in September (CME FedWatch indicates "nearly 90%) from expected to "almost certain," potentially putting a more aggressive 50 basis point option on the table. A positive result could alleviate short-term growth concerns, but before Friday's NFP, it's unlikely the market will fully reverse its bets on further rate cuts this year.

The US Dollar Index (DXY) has recently rebounded from a four-week low, but remains below its level prior to the release of July's employment data, suggesting that while bullish sentiment has recovered, a resurgence in momentum has yet to materialize. On the interest rate front, short-term yields are driven by policy expectations and are more resilient to employment data. A misstep in the ADP data could rapidly shift the swap curve forward, signaling the pace of rate cuts and compressing the dollar's yield differential advantage. Overall, this ADP report serves the dual purpose of "direction verification and pace calibration," making it a key variable in determining the dollar's pricing framework prior to the interest rate meeting.

Technical aspects:

According to the 10-minute candlestick chart of the US Dollar Index, the middle Bollinger Band is at 98.2483, the upper Bollinger Band at 98.3276, and the lower Bollinger Band at 98.1689. After a previous squeeze, the band is gently widening, indicating a potential for renewed volatility. Prices have been fluctuating upward from above the middle band, recently testing the upper band repeatedly, suggesting a short-term momentum structure of "moving higher along the upper band." The previous high of 98.3140 constitutes the first static resistance level. Further resistance above this level is expected to focus on the intersection of the upper Bollinger Band and 98.3450. Support below this level initially lies at the middle Bollinger Band at 98.2483. If this breaks below, the lower Bollinger Band will likely resonate with the previous low of 98.1689/98.1640. Further support is expected to shift downward to the previous extreme low of 98.0640.



Regarding momentum indicators, the MACD shows a DIFF of 0.0173, a DEA of 0.0119, and a MACD histogram of 0.0109, all expanding slightly above the zero axis, indicating bullish momentum is dominant but not yet entering an acceleration phase. The Relative Strength Index (RSI 14) is at 59.5294, indicating a "slightly strong but not overheated" range, leaving room for upward price movement. The overall structure resembles a rising channel with a "slowly upward trend" and a supportive band. If accompanied by positive fundamentals, a breakout with trend-following volume is likely. Conversely, if news shocks cause a drop below the middle band, the short-term trend will shift to a "upper band-middle band-lower band" retracement pattern. Based on this, key resistance levels are currently 98.3276/98.3450; key support levels are 98.2483 and 98.1689/98.1640; and the lower support level is 98.0640.

Market outlook:

Scenario 1 (Weaker Than Expected): If the August ADP reading falls significantly below 68K, the market will quickly convert the near-90% probability of a 25bp rate cut in September into a sure thing, and discuss the possibility of a 50bp cut. The corresponding market logic is: the US dollar will first decline and break below the middle Bollinger band at 98.2483, further testing 98.1689/98.1640. If selling pressure persists, a tail risk of 98.0640 should be factored in. At this point, the MACD is likely to show a decline, triggering the initial formation of a top divergence. The RSI will fall back from around 59 to neutral territory, and the market will shift into a volatile downward pattern of "retracement, retest, and re-selection."

Scenario 2 (Better Than Expected): If the ADP reading is mild or significantly better than expected, a short-term momentum rally could be triggered, with the US dollar expected to surge towards the upper limits of 98.3276 and 98.3450. A breakout and a retest would confirm this, and the 10-minute chart could potentially develop into an "ascending channel with continuation of the trend." However, before Friday's NFP release, the market is unlikely to fully rescind its bets on another decline this year. Therefore, even if a breakout occurs, further extensions will depend on subsequent NFP confirmation. Technically, the market favors a "pull-up-pull-back-reassessment" pattern of trading.