On Thursday (November 6), during the US trading session, weakness in the labor market weighed on the dollar and yields. The dollar index fell, extending its pullback below the 200-day moving average after failing to break through 100.360 earlier this week. The index fell 0.3% to 99.753. Risk sentiment turned cautious following a surge in layoff announcements and a broad decline in US Treasury yields.



A report from employment information firm Challenger, Gray Christmas Inc. showed that 153,074 jobs were laid off in October, a 183% increase from September, marking the highest October figure since 2003. This data has exacerbated concerns about the resilience of the U.S. economy and increased the likelihood of monetary easing before the end of the year.

The bond market reacted strongly to the surge in layoffs and legal uncertainty.

U.S. Treasury yields fell across the board as fixed-income markets reacted to a deteriorating labor outlook. The 10-year Treasury yield fell more than 6 basis points to 4.089%, the 2-year yield dropped to 3.566%, and the 30-year yield fell to 4.686%.

Previously, U.S. Supreme Court justices expressed skepticism about the legality of reciprocal tariffs introduced during the Trump administration. An unfavorable ruling on this policy could ease trade tensions and inflation expectations, further depressing yields.

The dovish repricing in the bond market pushed up the implied probability of a December rate cut shown by the CME FedWatch Tool from 62% the previous day to 69%, reversing some of the hawkish repricing that followed the Fed's November statement.

Currency cross-currency volatility exacerbates dollar weakness

The dollar also faced additional pressure from currency cross-currency fluctuations. The euro rose 0.3% to $1.15225, while the pound rose to $1.3088 after the Bank of England kept interest rates unchanged. Although the Bank of England's decision was widely expected, it helped maintain the interest rate differential with the dollar, exacerbating selling pressure on the dollar index basket. The yen also strengthened, with the dollar falling 0.4% against the yen to 153.51, further dragging down the dollar index.

Short-term outlook: The US dollar index faces greater risk of correction.


(US Dollar Index Daily Chart Source: FX678)

The daily chart for the US Dollar Index shows that the confirmed reversal below the 200-day moving average has decisively changed market sentiment towards the dollar in the short term. If the current selling pressure persists, the Dollar Index may test the support level of 99.463, the last line of defense before the 50-day moving average at 99.359. Downside risks remain high due to weak labor data, declining yields, and strengthening currency crossovers, unless new data or comments from the Federal Reserve change expectations.