U.S. Dollar Index (DX) Futures Technical Analysis – Trend Changes to Up on Higher Rate Hike Expectations

The U.S. Dollar is sharply higher against a basket of major currencies at the mid-session on Friday, following a similar move in U.S. Treasury yields, after jobs data came in much hotter than expected.

Nonfarm payrolls increased by 517,000 for January, notably above the 187,000 additions estimated by Dow Jones. Additionally, the unemployment rate fell to 3.4%, lower than the 3.6% expected by Dow Jones.

Average hourly earnings rose 0.3% after gaining 0.4% in December. That lowered the year-on-year increase in wages to 4.4% from 4.8% in December. Economists polled by Reuters had forecast a 4.3% year-on-year jump in wages.

At 17:31 GMT, March U.S. Dollar Index futures are trading 102.780, up 1.205 or +1.19%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $27.79, up $0.36 or +1.29%.

Ahead of the jobs report, traders were betting the Fed would end its rate hiking campaign in March with rates peaking below 5%. Traders are now pricing in the Fed’s policy rate to peak at 5.03% in June, up from 4.88% on Thursday afternoon.

The rally in the U.S. Dollar is reflecting the jump in expectations for the Fed’s terminal rate.

Daily March U.S. Dollar Index Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up earlier Friday when buyers took out the last main top at 102.655. A trade through 100.680 will change the main trend to down.

The minor range is 100.680 to 102.780. Its pivot at 101.730 is new support. This level will move up as the market moves higher.

The main range is 105.500 to 100.680. Its 50% level at 103.090 is the next upside target.

The major resistance is the long-term Fibonacci level at 103.664.

Daily March U.S. Dollar Technical Forecast

Trader reaction to the minor pivot at 101.730 is likely to determine the direction of the March U.S. Dollar Index into the close on Friday.

Bullish Scenario

A sustained move over 101.730 will signal the presence of buyers. If this continues to generate enough upside momentum into the close then look for a late session surge into a 50% level at 103.090, followed by 103.664.

Bearish Scenario

A sustained move under 101.730 will indicate the presence of sellers. This would be a bearish sign since it would put the index in a position to close lower for the session.