U.S. Dollar Index (DX) Futures Technical Analysis – Bears Hoping for Signs of a Loosening Labor Market

The U.S. Dollar is trading flat against a basket of major currencies on Friday after posting an impressive closing price reversal bottom the previous session. The overnight trade, however, has been less-dramatic and mostly subdued as traders await the release of the U.S. Non-Farm Payrolls report later today at 13:30 GMT.

At 09:50 GMT, March U.S. Dollar Index futures are trading 101.605, up 0.030 or +0.03%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.42, up $0.17 or +0.62%.

Dollar Boosted by Softer Tone from ECB, BOE

The dollar reversed early weakness on Thursday after the Euro and British Pound moved lower as traders took a dovish cue from policymakers at the European Central Bank (ECB) and the Bank of England (BOE), who said inflationary pressures in their economies have become more manageable.

US Non-Farm Payrolls Report to Set the Tone on Friday

Friday’s nonfarm payrolls report will be the next major test of the Fed’s fight against inflation. Signs are still pointing to a tight labor market, with the number of Americans filing new claims for unemployment benefits dropping to a nine-month low last week.

In today’s U.S. Non-Farm Payrolls report, analysts expect 185,000 jobs were added to the economy last month. This will be the lowest amount since January 2021. Analysts are also looking for the unemployment rate to edge up to 3.6%, and hourly wage inflation to stay flat at 0.3% on a monthly basis. The latter will indicate the strong labor market might have started to ease up.

A weaker-than-expected report will support the case for the Fed to end its rate hiking cycle in March. This could weaken the U.S. Dollar over the near-term. Strong data could support the dollar because it will give the Fed the room to implement additional rate hikes.

Daily March US Dollar Index Technical Analysis

The main trend is down according to the daily swing chart. However, Thursday’s closing price reversal bottom suggests momentum may be getting ready to shift to the upside.

A trade through 100.680 will negate the chart pattern and signal a resumption of the downtrend. A move through 102.655 will change the main trend to up.

The minor range is 102.655 to 100.680. The index is currently straddling its pivot at 101.668.

On the downside, the minor support is 101.000 to 100.680. The major target is the April 14 main bottom at 99.181. On the upside, the nearest major target is the long-term Fibonacci level at 103.664.

Daily March US Dollar Index Technical Forecast

Trader reaction to the minor pivot at 101.668 is likely to determine the direction of the March US Dollar Index on Friday.

Bearish Scenario

A sustained move under 101.668 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 100.680. This is a potential trigger point for an acceleration to the downside with 99.181 the next major target.

Bullish Scenario

A sustained move over 101.668 will signal the presence of buyers. If this generates enough upside momentum then look for buyers to take a run at the main top at 102.655.

Taking out 102.655 will change the main trend to up and could trigger an acceleration into the long-term resistance at 103.664.