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James Hyerczyk
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US Dollar Index

The U.S. Dollar drifted lower against a basket of major currencies on Thursday, dragged down by weaker Treasury yields and position-squaring ahead of Friday U.S. Non-Farm Payrolls report.

Despite the economic optimism, the dollar appears to be in no hurry to strengthen as long as Federal Reserve policymakers remain unlikely to budge on their accommodative stance.

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At 20:55 GMT, June U.S. Dollar Index futures are trading 90.900, down 0.393 or -0.43%.

The Fed plans to keep borrowing costs near 0% and maintain monthly asset purchases worth $120 billion until it sees “substantial further progress” towards full employment and is 2% flexible inflation target.

In other news, U.S. Treasury yields remained under pressure despite another bullish jobs report. Data out Thursday showed U.S. employment picture improved sharply last week, with first-time claims for unemployment insurance hitting a fresh pandemic-era low.

Initial claims totaled 498,000 for the week ended March 1, against the Dow Jones estimate of 527,000. That was down from the previous week’s upwardly revised total of 590,000.

This news follows the ADP private payrolls report released on Wednesday, which showed 742,000 new jobs were added in April, though this was just below the 800,000 forecast from economists surveyed by Dow Jones.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing. The uptrend turned up last Friday when buyers took out 91.105. However, the lack of follow-through on the move suggests the attempted breakout was likely fueled by end-of-the-month profit-taking rather than new buying.

A trade through 91.435 will signal a resumption of the uptrend. The main trend will change to down on a move through 90.395.

The short-term range is 89.655 to 93.470. Its retracement zone at 91.110 to 91.565 is resistance.

The minor range is 90.395 to 91.435. The index is currently straddling its 50% level at 90.915.

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Short-Term Outlook

The early direction of the June U.S. Dollar Index on Friday is likely to be determined by trader reaction to the pivot at 90.915.

Bearish Scenario

A sustained move under 90.915 will indicate the presence of sellers. This will make 91.435 a new main top, setting up a potential challenge of 90.395. Taking out this bottom will change the main trend to down.

Bullish Scenario

A sustained move over 90.915 will signal the presence of buyers. They are going to try to form a potentially bullish secondary higher bottom. The first upside target is 91.110, followed by 91.435 then 91.565.

For a look at all of today’s economic events, check out our economic calendar.

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