U.S. Dollar Index (DX) Futures Technical Analysis – NFP Data Sets the Tone on Friday

The U.S. Dollar is edging lower against a basket of major currencies on Friday as traders await the release of the latest U.S. labor market report. This major data point could offer clues on the Fed’s next steps for monetary policy.

According to a Reuters survey of economists, non-farm payrolls likely increased by 205,000 jobs in February after surging by 517,000 in January. The unemployment rate is expected to remain at 3.4%.

At 08:00 GMT, the March U.S. Dollar Index is trading at 105.195, down 0.110 or -0.10%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.53, down $0.08 or -0.28%.

The dollar fell on Thursday after a rise in jobless claims in the United States implied possibly easing conditions in the labor market and tempered expectations of further aggressive rate hikes from the Federal Reserve.

The jump in unemployment benefit claims was enough to cause traders to unwind some bets that U.S. rates would rise much higher than previously expected. Futures pricing now implies a roughly 54% chance that the Fed will raise rates by 50 basis points this month, compared with 70% before the data release.

The Fed funds rate is projected to peak just below 5.5% by July.

Daily March US Dollar Index Technical Analysis

The main trend is up according to the daily swing chart. A trade through 105.870 will signal a resumption of the uptrend. A move through 104.095.

On the upside, resistance is a long-term 50% level at 105.723. It essentially stopped the rally at 105.870 on Wednesday. The closest support is a minor pivot at 104.958.

Daily March US Dollar Index Technical Forecast

Trader reaction to the minor pivot at 104.958 is likely to determine the direction of the March US Dollar Index on Friday.

Bullish Scenario

A sustained move over 104.958 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at 105.723 – 105.870.

Bearish Scenario

A sustained move under 104.958 will signal the presence of sellers. If this generates enough downside momentum then look for a possible break into the pair of main bottoms at 104.095 and 104.045.