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The US Dollar is regaining lost ground against major currencies.
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Market attention turns to the Nonfarm Payrolls report and Fed Chair Jerome Powell's speech.
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The US Dollar Index rebounds, aiming to reclaim 102.00.
The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, is attempting to recover while trading around 102.50 on Friday. Market sentiment is gradually stabilizing following US President Donald Trump’s reciprocal tariffs announcement. The focus now shifts to the Nonfarm Payrolls (NFP) report and a speech from Federal Reserve (Fed) Chair Jerome Powell later in the day.
Market Focus: Nonfarm Payrolls and Key Economic Indicators
- The upcoming NFP data release has expectations ranging from 80,000 to 200,000, with a consensus forecast of 135,000 for March. However, given the recent declines in JOLTS Job Openings and the spike in Challenger Job Cuts, concerns arise over whether the 135,000 projection might be overly optimistic. Markets will closely watch Powell’s speech for any signals on the Fed’s stance.
- At 12:30 GMT, US employment data will be released, including Nonfarm Payrolls, which are expected to come in at 135,000, down from 151,000 in February. A reading below 80,000 could weaken the USD, whereas a figure above 200,000 could strengthen it. Meanwhile, Average Hourly Earnings are expected to remain steady at 0.3%, and the Unemployment Rate is projected to stay at 4.1%, unchanged from February.
- Powell will deliver a speech at 15:25 GMT at the Society for Advancing Business Editing and Writing (SABEW) Annual Conference, providing insights into the economic outlook. Later in the day, Fed Governor Michael Barr will discuss AI and Banking at 16:00 GMT, followed by Fed Governor Chris Waller’s speech on payments at a New York Fed Conference at 16:45 GMT.
- Global equity markets remain under pressure, with Asian and European stocks dropping between 1% and 2% on average. US futures are also trading lower ahead of the opening bell, although losses are currently contained below 1%.
- The CME FedWatch Tool indicates a 68.1% probability of the Fed keeping interest rates within the 4.25%-4.50% range in May, down from 81.5% last week. Looking ahead to June’s meeting, the chances of lower borrowing costs stand at 92.6%, up from 81.1% a week ago. Meanwhile, US 10-year Treasury yields hover around 3.95%, marking a fresh five-month low, with the next major support near 3.69%, last seen in October 2024.
US Dollar Index Technical Outlook: Momentum Shifts
The US Dollar Index continues to swing between strength and weakness. Historically, the USD enjoyed prolonged strength, but since March, the landscape has shifted with the introduction of Germany’s defense budget spending bill and Trump’s return to office. If US tariffs begin to weigh on the economy, further USD weakness could push DXY below 100.00 later this year, particularly amid stagflation and recession concerns.
The sharp drop on Thursday has transformed several support levels into resistance. The first key resistance is 103.18, which previously held as a critical support throughout March. If DXY moves higher, the 104.00 level and the 200-day Simple Moving Average (SMA) at 104.89 will serve as additional resistance barriers.
On the downside, 101.90 is the first key support level, which could trigger a bounce as the Relative Strength Index (RSI) signals oversold conditions on the daily chart. While a break below 101.90 may not happen immediately, it could open the door for a decline toward 100.00 in the coming days.
US Dollar Index: Daily Chart
