US Dollar pulls back from intraday highs as soft ADP report tempers optimism

• The US Dollar recovers slightly after hitting more than three-year lows, supported by upbeat data and Powell’s measured tone.
• Both the ISM Manufacturing PMI and JOLTS job openings point to underlying strength in the US economy.
• ADP Employment Change misses forecast with 33,000 job losses in June, marking the first drop since 2023.

The US Dollar (USD) is trading with a slightly positive tone on Wednesday, bouncing back a bit after hitting the lowest level since February 2022 on Tuesday.

The modest rebound comes as traders digest US economic data and cautious comments from Federal Reserve (Fed) Chair Jerome Powell, which have slightly eased the downward pressure on the Greenback. Still, concerns over tariffs, fiscal policy and the Fed’s next move continue to weigh on the USD broader outlook.

The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, is edging lower during the American trading hours, paring part of the gains registered earlier in the day. After climbing to an intraday peak of 97.15 and briefly erasing all of Tuesday’s losses, the index is now hovering near 96.80, up around 0.15% on the day.

Fed Chair Jerome Powell said on Tuesday that the Fed has delayed cutting interest rates to better understand the impact of tariffs on inflation and the broader economy.

Speaking at the ECB Forum in Sintra, Portugal, Powell noted that “as long as the US economy is in solid shape, the prudent thing to do is to wait and learn more” before moving forward with rate cuts. He explained that without these trade-related price pressures, the Fed might have already started easing policy.

While Powell emphasized the need for a cautious, data-driven approach, his message is increasingly overshadowed by growing political pressure to lower interest rates. Still, he did not rule out a rate cut at this month’s meeting, but made it clear that any decision will depend on upcoming data and economic conditions.

• US data released on Tuesday showed signs of resilience in the economy. The ISM Manufacturing Purchasing Managers Index (PMI) for June rose to 49.0, slightly above forecasts, suggesting that while factory activity is still in contraction, the pace of decline is slowing. Meanwhile, job openings in the JOLTS report increased to 7.77 million in May, surpassing expectations and marking the highest level since November 2024.   Together, these figures indicate a firm labor market and manufacturing sector that may be stabilizing. The surprise strength helped limit downside pressure on the US Dollar.
• Investors remain largely unfazed after the US Senate passed the controversial “One Big Beautiful Bill” on Tuesday, with Vice President J.D. Vance breaking the 50-50 tie. The bill, a sweeping package of tax cuts, spending changes, and policy shifts, includes reductions to social programs, boosts to defense and fossil fuel funding, and significant tax relief. While supporters argue it will stimulate growth, the Senate bill is estimated to add nearly $3.3 trillion to deficits over the next decade, roughly $500 billion more than the House version. The bill now heads back to the House of Representatives, where lawmakers aim to pass it before the July 4 holiday.
• Trade policy remains a central focus for the market as the US approaches its July 9 tariff deadline. President Trump has renewed threats to impose steep tariffs, possibly as high as 35% on Japanese auto exports if a deal isn’t reached, while tensions with the European Union (EU) are also building. Brussels is urging Washington to roll back duties on steel, aluminum, and cars, warning that retaliatory measures will be taken if talks stall. In contrast, trade negotiations with India appear to be moving in a more positive direction. US Treasury Secretary Bessent has signaled that a deal is close, which could lead to reduced tariffs on key Indian exports.
• Meanwhile, the US-China trade relationship remains strained, with a 55% tariff still in place on a wide range of Chinese products. The US and China recently signed a trade agreement aimed at de-escalating tensions and facilitating easier access for American firms to obtain magnets and rare earth minerals from China.
• Geopolitical tensions in the Middle East may ease after US President Donald Trump announced that Israel has agreed to the “necessary conditions” for a 60-day ceasefire in Gaza. In a statement posted on Truth Social, Trump said the US will work with all parties to end the war, urging Hamas to accept the deal, warning that “it will not get better – it will only get worse.” According to the BBC, Hamas has expressed readiness to negotiate a truce if it leads to a complete end to the war, while Israeli officials have yet to confirm acceptance of the proposed terms.
• The latest ADP Employment Change report showed an unexpected decline of 33,000 private-sector jobs in June, marking the first monthly contraction in over a year. Markets had anticipated a gain of around 95,000, making the miss particularly notable. According to ADP, the decline was largely driven by weakness in trade-sensitive industries and hiring slowdowns in small businesses.
• The main event, however, will be Thursday’s Nonfarm Payrolls (NFP) report, scheduled for release a day earlier than usual due to the July 4 holiday. Economists expect the US economy to have added around 110,000 jobs in June, a slowdown from the 139,000 increase seen in May. The unemployment rate is projected to edge up slightly to 4.3%. The NFP data is a key indicator for the Fed’s rate path.
• The NFP release will follow closely on the heels of today’s ADP employment data, often viewed as a leading signal, even if not always aligned. If both ADP and NFP figures come in strong, it would indicate continued labor market resilience and may reduce the likelihood of a near-term Fed rate cut, which could give the US Dollar a boost. However, a weak showing in both reports would reinforce concerns about slowing job growth and increase pressure on the Fed to act earlier than expected, likely dragging the Greenback lower.

Technical analysis: US Dollar Index attempts rebound, RSI lifts from oversold zone

The US Dollar Index (DXY) is showing early signs of stabilization on Wednesday. After hitting fresh multi-year lows on Tuesday, the index is attempting a mild recovery.

While the rebound appears encouraging, the price remains capped below the 9-day Exponential Moving Average (EMA), currently at around 97.39. Price action recently broke slightly below the lower boundary of a falling wedge pattern — a structure often associated with bullish reversal signals.

A daily close above the wedge resistance and the mentioned EMA could open the door for a stronger recovery toward the 98.20-98.60 zone.

Momentum indicators are also indicating a possible turnaround. The Relative Strength Index (RSI) has eased slightly from oversold territory, now hovering around 32.89, signaling that selling pressure is cooling but not yet reversed.

Meanwhile, the Rate of Change (ROC) indicator remains negative at -1.89, though its downward slope is flattening, suggesting that bearish momentum is starting to fade. While the ADP report missed expectations, the market reaction has been muted. Attention now turns to Thursday’s Nonfarm Payrolls (NFP) report. A stronger-than-expected NFP print could still act as a catalyst to push the DXY above 97.50 and confirm a short-term bottom.