US Dollar Index (DXY) News: Traders Brace for NFP Data with DXY Near Two-Week High

U.S. Dollar Holds Steady Ahead of Key Economic Data

The U.S. Dollar Index (DXY) remained nearly flat on Tuesday as markets reopened following the Labor Day holiday, with trading volumes expected to remain light ahead of Friday’s pivotal U.S. Non-Farm Payrolls (NFP) report. Investors are cautiously positioning themselves in anticipation of key economic data that could heavily influence the Federal Reserve’s upcoming interest rate decisions.

At 14:13 GMT, the U.S. Dollar Index (DXY) is trading 101.686, up 0.042 or +0.04%.

Technical Overview

The U.S. Dollar is currently in a counter-trend rally, recovering from a low of 100.534 on August 26 to reach 101.866 earlier today. This move is part of a broader downtrend characterized by a series of lower tops and bottoms. On the upside, the immediate target for the dollar is a pivot at 102.040, followed by resistance levels at the 50-day moving average of 103.517 and the 200-day moving average of 103.935. A breakout above 102.040, supported by strong volume, could trigger further gains. However, if 101.866 is confirmed as a minor top, a pullback to 101.200 could be expected.

Impact of Upcoming U.S. Payrolls Data

The dollar index is hovering near a two-week high as investors brace for a slew of economic reports this week, with the NFP report being the most crucial. The market is currently pricing in a 69% chance of a 25-basis-point cut at the Fed’s September meeting, with a 31% probability of a larger 50-basis-point cut. The direction of the dollar in the short term will likely be determined by the strength of the NFP data. Economists are forecasting an increase of 165,000 jobs in August, up from 114,000 in July. A weaker-than-expected report could push expectations toward a larger rate cut, potentially weakening the dollar.

Global Currency Movements

In other currency news, the Japanese yen gained 0.7% to 145.815 against the dollar, snapping a four-day losing streak. This move was fueled by comments from the Bank of Japan’s governor, who reiterated the central bank’s commitment to raising interest rates if economic conditions meet expectations. The yen has appreciated by about 10% in the past two months, partly due to official intervention.

Meanwhile, the euro eased 0.13% to $1.1056, and sterling slipped 0.17% to $1.3124, both remaining close to their recent lows. The dollar index, measuring the greenback against a basket of six major currencies, stayed in positive territory at 101.68, just below Monday’s high of 101.79. The index fell by 2.2% in August on mounting expectations of U.S. rate cuts.

Market Forecast

Looking ahead, the U.S. Dollar is likely to remain range-bound in the lead-up to Friday’s NFP report. A robust jobs report could reinforce the Fed’s gradual approach to rate cuts, supporting the dollar. However, a significant miss could increase the likelihood of a more aggressive 50-basis-point cut, putting downward pressure on the greenback. Traders should closely monitor the upcoming job openings and jobless claims data for additional clues on the labor market’s health ahead of the Fed’s decision.