Powell slows down rate cuts, initial jobless claims show strong employment: the US dollar's dual engines?
2025-09-18 21:22:47
On Thursday (September 18th) during the North American session, the US dollar index traded above 97. The latest weekly US initial jobless claims data fell to 231,000, below expectations of 240,000 and below the previous reading of 264,000 (revised up from 263,000). The four-week moving average fell by 750 to 240,000. Continuing claims fell to 1,920,000, corresponding to a seasonally adjusted insured unemployment rate of 1.3%. Following the release of the data, the US dollar index maintained its buying momentum, leading to short-term volatility in risk-related assets and divergent performance on the interest rate front.
This week's Department of Labor (DOL) report showed that initial claims fell to 231K in the week ending September 13th, significantly below the consensus forecast of 240K and down significantly from the previous week's 264K (revised from 263K). It's worth noting that the previous week's "abnormal surge" was attributed to misreporting and fraudulent claims across various industries in Texas, which briefly distorted high-frequency labor market signals. The four-week moving average also decreased by 750 to 240K, indicating that short-term disturbances have not altered the trend. Regarding continuing claims, the latest week (week ending September 6th) fell to 1920K, also better than the 1950K forecast and the lowest level since late May. Combined with the 1.3% insured unemployment rate, the overall message is that employment is stabilizing and not weakening uncontrollably.
From the Federal Reserve's perspective, Wednesday's meeting saw a small, 25 basis point interest rate cut to a range of 4.0%-4.25%, as expected. The dot plot also hinted at two more rate cuts in 2025 and another in 2026, but internal disagreements widened. Powell described these as "risk-managed rate cuts," emphasizing that inflation will remain viscous from the end of the year to 2026, and there's no rush for a rapid rate cut. This statement, coupled with stronger-than-expected retail sales (+0.6% month-over-month and +5% year-over-year in August) and today's stronger initial jobless claims, objectively provides fundamental support for the US dollar.
There were also bright spots in regional manufacturing data: the Philadelphia Fed Manufacturing Index jumped to +23.2 in September (-0.3 in the previous month), with both new orders and shipments rising, while the price component declined but remained high. The six-month forward-looking index rose to 31.5. In contrast, the Empire State Index, which was -8.7 earlier this week, suggests that economic conditions remain regionally diverse. Overall, today's decline in initial and continuing claims has eased concerns about a rapidly deteriorating labor force, weakening bets on aggressive easing and helping the US dollar stabilize above the 97 mark.
The 30-minute chart shows the US Dollar Index trading above the middle Bollinger Band (97.0287, upper Bollinger Band 97.2376, and lower Bollinger Band 96.8198). The price has rapidly recovered from the "needle-like" low of 96.2109, forming a second pullback at 96.8229 before rising, indicating strong buying below. Short-term resistance has risen to 97.50, with the 98 mark as the next target. Support lies near the middle Bollinger Band 97.03, followed by the overlapping lower Bollinger Band 96.82 and the previous low of 96.8229, and further below at 96.56 and the extreme low of 96.2109.
In terms of the overall structure, the bulls maintain repeated retracement and confirmation of the middle track. Once the retracement fails to break and attacks again, the 97.50-98 range is expected to be tested; on the contrary, if it falls back below 97.03 and effectively expands the Bollinger bandwidth to the lower edge, the short-term will turn into a horizontal channel oscillation of 96.82-97.03.
Today's overall positive initial jobless claims data tempered the narrative of a "sudden cooling labor force and the Fed's passive easing," and continued defensive buying of the US dollar. Risk assets briefly experienced a knee-jerk reaction, but diverging interest rates (data-driven short-term support and a repricing of growth and inflation on the long side) prevented a unilateral risk appetite.
On the options side, the "price magnetism" around 97.30 is increasing, which can easily amplify intraday noise fluctuations. The key points to observe for sentiment turning points are:
1) Can the high-frequency employment indicators (initial and continuing claims) maintain this week’s synchronized improvement?
2) Can inflation stickiness and “real demand” at the retail end coexist without triggering an upward revision of the final interest rate?
3) If a short-term breakout above 97.50 fails, will the market quickly fall back to the mid-line, triggering a mix of short-term buying and buying from those who missed out? Overall, the market consensus has shifted from concerns about a labor market collapse to a neutral to strong stance of "gentle cooling but not stalling." The dollar's sentiment score has risen, but it hasn't reached the level of "overheated market."
Fundamentals: Initial claims fell significantly, reducing concerns about a deteriorating labor force
This week's Department of Labor (DOL) report showed that initial claims fell to 231K in the week ending September 13th, significantly below the consensus forecast of 240K and down significantly from the previous week's 264K (revised from 263K). It's worth noting that the previous week's "abnormal surge" was attributed to misreporting and fraudulent claims across various industries in Texas, which briefly distorted high-frequency labor market signals. The four-week moving average also decreased by 750 to 240K, indicating that short-term disturbances have not altered the trend. Regarding continuing claims, the latest week (week ending September 6th) fell to 1920K, also better than the 1950K forecast and the lowest level since late May. Combined with the 1.3% insured unemployment rate, the overall message is that employment is stabilizing and not weakening uncontrollably.
From the Federal Reserve's perspective, Wednesday's meeting saw a small, 25 basis point interest rate cut to a range of 4.0%-4.25%, as expected. The dot plot also hinted at two more rate cuts in 2025 and another in 2026, but internal disagreements widened. Powell described these as "risk-managed rate cuts," emphasizing that inflation will remain viscous from the end of the year to 2026, and there's no rush for a rapid rate cut. This statement, coupled with stronger-than-expected retail sales (+0.6% month-over-month and +5% year-over-year in August) and today's stronger initial jobless claims, objectively provides fundamental support for the US dollar.
There were also bright spots in regional manufacturing data: the Philadelphia Fed Manufacturing Index jumped to +23.2 in September (-0.3 in the previous month), with both new orders and shipments rising, while the price component declined but remained high. The six-month forward-looking index rose to 31.5. In contrast, the Empire State Index, which was -8.7 earlier this week, suggests that economic conditions remain regionally diverse. Overall, today's decline in initial and continuing claims has eased concerns about a rapidly deteriorating labor force, weakening bets on aggressive easing and helping the US dollar stabilize above the 97 mark.
Technical aspects:
The 30-minute chart shows the US Dollar Index trading above the middle Bollinger Band (97.0287, upper Bollinger Band 97.2376, and lower Bollinger Band 96.8198). The price has rapidly recovered from the "needle-like" low of 96.2109, forming a second pullback at 96.8229 before rising, indicating strong buying below. Short-term resistance has risen to 97.50, with the 98 mark as the next target. Support lies near the middle Bollinger Band 97.03, followed by the overlapping lower Bollinger Band 96.82 and the previous low of 96.8229, and further below at 96.56 and the extreme low of 96.2109.
In terms of the overall structure, the bulls maintain repeated retracement and confirmation of the middle track. Once the retracement fails to break and attacks again, the 97.50-98 range is expected to be tested; on the contrary, if it falls back below 97.03 and effectively expands the Bollinger bandwidth to the lower edge, the short-term will turn into a horizontal channel oscillation of 96.82-97.03.
Market Sentiment Observation
Today's overall positive initial jobless claims data tempered the narrative of a "sudden cooling labor force and the Fed's passive easing," and continued defensive buying of the US dollar. Risk assets briefly experienced a knee-jerk reaction, but diverging interest rates (data-driven short-term support and a repricing of growth and inflation on the long side) prevented a unilateral risk appetite.
On the options side, the "price magnetism" around 97.30 is increasing, which can easily amplify intraday noise fluctuations. The key points to observe for sentiment turning points are:
1) Can the high-frequency employment indicators (initial and continuing claims) maintain this week’s synchronized improvement?
2) Can inflation stickiness and “real demand” at the retail end coexist without triggering an upward revision of the final interest rate?
3) If a short-term breakout above 97.50 fails, will the market quickly fall back to the mid-line, triggering a mix of short-term buying and buying from those who missed out? Overall, the market consensus has shifted from concerns about a labor market collapse to a neutral to strong stance of "gentle cooling but not stalling." The dollar's sentiment score has risen, but it hasn't reached the level of "overheated market."
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