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US Dollar Weakens as Risk-Aversion Creeps In

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US Dollar Weakens as Risk-Aversion Creeps In

The US dollar was weaker Thursday, declining against a basket of currencies as risk-aversion entered the markets ahead of Friday’s nonfarm payrolls report.

The US dollar index, a weighted average of the greenback’s performance against six commonly traded peers, slipped 0.15 percent to 80.55.

By the mid-day session the US dollar had pared back its gains against the euro, which was responding to the European Central Bank’s landmark policy decision today.

The ECB cut its benchmark lending rate from 0.25 percent to 0.15 percent and became the first major institution to charge deposit fees. The central bank reduced its deposit rate to -0.1 percent in an effort to combat deflation, indicating to the markets that rates would remain low for a long time.

The EURUSD rebounded from an intraday low of 1.3512, advancing 0.2 percent to 1.3627. The ECB-driven plunge is expected to resume, however, as the markets continue to weigh in on today’s announcement. The EURUSD has been in decline for the past month, falling from a two-and-a-half year high of 1.39993. In the process the pair fell below its 50-day and 20-day moving averages.

The British pound advanced sharply against its US counterpart, rising 0.42 percent to 1.6807 after Bank of England Governor Mark Carney said the economy was getting closer to the point where a rate-hike would be considered.

The GBPUSD is supported at 1.6700. The pair is currently testing the 1.6805 resistance.

The USDJPY declined to daily lows in the North American session as risk aversion began gripping the markets. The USDJPY declined 0.29 percent to 102.41. The daily chart shows initial support situated at 102.29. Resistance is likely to be met at 102.88.

The greenback tread water against its northern counterpart as Canadian building permits rose less than forecast in April. Canadian building permits rose 1.1 percent, as commercial building intentions fell to the lowest level in more than a year. Economists forecast a gain of 4 percent in April.

Statistics Canada will report on the employment situation on Friday. The report is expected to show employment rose 25,000 in May, following a decline of 28,900 the prior month.

The USDCAD is trading at 1.0935. Initial support is likely found at 1.0910 and resistance at 1.0963.

In US data, jobless claims rose from 304,000 to 312,000 in the week ended May 31. Economists forecast a rise to 310,000.

The dollar will face considerable price action Friday when the Commerce Department reports on May nonfarm payrolls. Market sentiment has weakened somewhat after the ADP Institute said US businesses added only 179,000 jobs last month. A median estimate of economists polled by Bloomberg is calling for a gain of 213,000. The unemployment rate is forecast to jump from 6.3 percent to 6.4 percent.

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