Forex Watchlist: Forex Watchlist: Dollar Index (DXY) Trend Pullback Ahead of the U.S. NFP Report


 It’s non-farm payrolls (NFP) Friday so you know we gotta check out the U.S. dollar!

Today we’re taking a closer look at the U.S. dollar index (DXY).

Are you seeing the trend pullback that I’m seeing?

U.S. Dollar Index (DXY): 1-hour

In case you were too busy minding your stocks or crypto trades, you should know that the U.S. dollar is having a killer week after Fed Chairman Powell all but said that the Fed gang is eyeing higher interest rates than what markets have already priced in AND that they will likely keep rates higher for longer.

Not surprisingly, DXY jumped at the news. The index was hanging out around the 104.20 levels before Powell’s testimony shot it all the way up to the 105.90 intraweek highs.

A bit of profit-taking and risk-taking dragged the safe-haven index back down to its current 105.20 zone that may just serve as an entry point for trend traders.

See, 105.20 is right in the middle of an ascending channel that’s been around since mid-February. Not only that, but the area also marks a previous resistance zone AND the 38.2% Fibonacci retracement of this week’s upswing.

The cherry on top of the sweet setup is that 105.20 is right on top of the 1-hour chart’s 100 and 200 SMAs.

Think DXY will extend its uptrend today?

Markets expect Uncle Sam to add a net of 200K jobs in February, much less than the 517K addition that we saw in January.

But note that the NFP headline figure has surprised to the upside for a whopping 10 months in a row now, and 12 out of the last 13 months.

This week’s ADP and JOLTS jobs releases also support another strong number that will likely give the Fed more confidence to raise its interest rates even higher.

If today’s NFP event supports the Fed’s higher-for-longer narrative, then DXY could jump to to its intraweek highs near the 106.00 psychological handle.

But if today’s release turns out to be a non-starter, or if markets focus on profit-taking from their USD gains, then DXY could revisit lower inflection points like 104.60 or 104.20.