US Dollar Price Forecast: DXY Eyes 100.00 Ahead of NFP – Can GBP/USD and EUR/USD Hold?

Market Overview

During the European trading session, the US Dollar found some footing & managed to push above the 99.00 level. At this point, the US Dollar Index (DXY) – a measure of the value of the US Dollar against six major currencies – is at 99.07, with a minuscule gain of 0.03%, but that gain is mainly due to a surge in safe-haven demand driven by escalating tensions in the Middle East.

Geopolitical Tensions Are Pushing the Dollar Up

As we noted earlier, the US-Israel conflict with Iran has gone from bad to worse, sending oil prices soaring and raising concerns about inflation. And make no mistake, Iran’s now fired missiles and drones across the Gulf, hitting an oil refinery in Bahrain, while Israel just kept on bombing Tehran.

The US has even suspended operations at its embassy in Kuwait, which is adding to the uncertainty and boosting the dollar.

The fact that US President Donald Trump said the Iranians were trying to negotiate but that it was too late isn’t helping either – people are buying the dollar just in case things get even worse.

Fed Rate Speculations Give the Dollar Another Boost

On the economic front, Fed officials keep saying that if inflation stays high, they’ll have to raise interest rates. And then there’s Chicago Fed President Austan Goolsbee saying how important it is to trust in the Fed and its independence – all of which suggests more rate hikes are on the cards.

As well as all that, traders are keeping a close eye on US data releases, particularly Nonfarm Payrolls (NFP) and Retail Sales.

The February NFP is looking like it’s going to be around 59K – compared to a pretty impressive 130K in January – while Retail Sales might actually fall 0.3% in January. Stronger job growth will probably keep the dollar up, but if things don’t go so well in that department, we can expect things to slow down.

US Dollar Index (DXY) Forecast: Ascending Channel Targets $99.68

The US Dollar Index is trading around $99.21 – still very much locked inside a well defined upwards sloping channel on the 2 hour chart. The price is holding nicely above the 50 day EMA, which comes in at $98.87, and is also comfortably above the 200 day EMA which is down at $98.03 – which is all good news for the bulls.

Recently, we’ve seen some consolidation just above the 0.236 fib level at $99.18, and it looks to me like the buyers are doing a pretty good job of defending their positions rather than cutting and running, which is a good sign. The 0.382 and 0.5 fib retracement levels at $98.87 and $98.62 look to be acting as a bit of a safety net, which, given the channel is rising, is no surprise at all.

RSI is still around the 55-60 mark, which tells us that the dollar is still moving steadily upwards without getting overextended. If and when we see a sustained move above $99.50 then I think we can expect to see a push up towards $99.68 – and maybe even on to $100.00.

GBP/USD Technical Outlook: Bearish Channel Pressures $1.3300 Support

GBP/USD is trading around $1.3327, which is still very much inside a clear bearish channel on the 2 hour chart. The price remains below both the 50 day and 200 day EMAs, which are both trending lower, which is just solidifying the downwards momentum. If we take a look at the recent candles, we can see that the price is actually getting rejected time and time again at the channel midline and the $1.3375 – $1.3400 resistance zone.

Immediate support comes in at $1.3306, and then we have $1.3254 and the channel base down at $1.3210 to worry about. RSI is hovering around 45-50, which suggests the bulls aren’t exactly doing much work here.

If and when we see a move below $1.3300, I think we can expect a drop to $1.3250. But if we do manage to recover above $1.34 then maybe – just maybe – we can start to think about breaking above the upper channel boundary and shifting the momentum back in our favour.

EUR/USD Technical Analysis: Bearish Channel Pressures $1.1600 Support

EUR/USD is currently trading around $1.1579, which is still very much within a clear bearish channel on the 2 hour chart. The price remains below both the 50 day and 200 day EMAs, which are both sloping downwards – which is reinforcing the prevailing bearish picture.

The price has actually fallen beneath the 0.236 fib level at $1.16, and is currently hovering just above the recent swing low at $1.1531. If we take a look at the recent candles, we can see that the price is actually being rejected at $1.1644 (0.382 fib), which tells us that the sellers are still very much active on any potential rallies.

RSI is still sitting at around 40-45, which to me suggests that the euro is still struggling to put together a decent recovery – because lets be honest a reading of 40 is never a strong number. If we do see a sustained move below $1.1530 then I think we can expect to see a drop all the way down to $1.1486. But if we do manage to recover above $1.16 then maybe – just maybe – we can start to think about $1.1679.