US Dollar Forecast: DXY Gains on War Risks Before U.S. Jobs Report

Dollar Bounces Back as Trump’s Speech Kills Peace Talk Optimism

Trump’s speech Wednesday night changed everything for the dollar. Traders had been buying into the idea that the war was winding down. That idea died fast. Investors played defense and the dollar caught a bid. With the Non-Farm Payrolls report coming Friday, nobody wanted to be short the greenback heading into the weekend either.

Technical Outlook

Technically, the main trend is up according to the daily swing chart. A trade through 98.880 will change the main trend to down. A move through the swing top at 100.643 will signal a resumption of the uptrend. The minor trend is also up. If the minor swing bottom at 99.298 fails, momentum will shift to the downside.

Also controlling the trend is the trend line at 99.712. This has been controlling the uptrend since the January 27 main bottom at 95.551. On Wednesday, the market dipped below this line, but yesterday, it recovered it.

The major support is the 200-day moving average at 98.443 and the 50-day moving average at 98.381. The 50-day MA is currently in a position to crossover to the strong side of the 200-day MA, this should be supportive for the uptrend and could help accelerate the rally.

The nearest upside target is the March 31 top at 100.643. Taking out this level with conviction could trigger a strong upside breakout with 101.977 a potential target.

Trump Removed the Hope and the Dollar Filled the Void

Trump’s speech made it clear the war isn’t ending soon. More aggressive military action is coming over the next few weeks and the market heard that loud and clear. Risk sentiment flipped fast. Traders moved out of risk assets and back into the dollar. In my opinion that’s the whole story in one move.

Oil Up, Yields Up, Dollar Up

Oil surged after the speech and that created two problems at once. Higher oil pushes inflation expectations up which delays Fed rate cuts and keeps yields elevated. At the same time it raises global growth concerns which hurts risk assets. Both of those outcomes support the dollar. It’s a clean trade when they line up like that.

Nobody Wants to Be Short the Dollar Into the Jobs Report

Friday’s Non-Farm Payrolls report added another reason to buy the dollar. Expectations are for a modest job gain but nobody wanted to be short heading into a number that could move the market. Holding a short-dollar position into a long weekend with a jobs report in between is a tough spot. Most traders chose not to be in it.

Thursday’s price action was simple. Safety first, risk off, dollar up.

More Information in our Economic Calendar.