The US dollar index (DXY) hints at a swing low ahead of NFP
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The US dollar was the strongest major currency on Wednesday, supported by rising US yields and softer import/export data (which points to a softer global economy). And whilst the prices paid component of the ISM services PMI softened to a 20-month low of 68.8, it remains historically high relative to its long-term average of 59.8 - which suggests the aggressive Fed tightening is yet to make an impact on the inflationary forces of the robust services sector.
The main economic event for the dollar this week is tomorrow's NFP report. There was some excitement that it may come in soft due to the notable fall in job openings (-9.8%), but ADP employment came in slight above expectations at 208k yesterday.
As for the US dollar index (DXY) it is showing the potential for a swing low to form. As noted earlier this week, the bias was for a deeper pullback on the US dollar and to then look for evidence of a swing low. Given the RSI (2) moved below 10 (overbought) ahead of a bullish inside bar occurring above the 2002 highs, I suspect we are at or near a swing low for the dollar. This is also backed up by the fact US yields are also seemingly trying to print a swing low. And a strong NFP report tomorrow could help solidify this near-term bullish bias.
The bias remains bullish above 109.27 (below the small consolidation prior to its breakout) and for a move towards 114.0.
The main economic event for the dollar this week is tomorrow's NFP report. There was some excitement that it may come in soft due to the notable fall in job openings (-9.8%), but ADP employment came in slight above expectations at 208k yesterday.
As for the US dollar index (DXY) it is showing the potential for a swing low to form. As noted earlier this week, the bias was for a deeper pullback on the US dollar and to then look for evidence of a swing low. Given the RSI (2) moved below 10 (overbought) ahead of a bullish inside bar occurring above the 2002 highs, I suspect we are at or near a swing low for the dollar. This is also backed up by the fact US yields are also seemingly trying to print a swing low. And a strong NFP report tomorrow could help solidify this near-term bullish bias.
The bias remains bullish above 109.27 (below the small consolidation prior to its breakout) and for a move towards 114.0.
Note
So far so good - it's hard to deny a swing low is in place. BUt that gives no indication as to how much it can rally (or if it will following today's NFP report). The dollar index reached a 3-day high in line with yesterday’s bias, and we see the potential for further gains. EUR/USD continued lower after hitting resistance at parity, with GBP, AUD and AUD all tracking it lower. It’s all about the dollar, and whether its strength continues into the weekend likely depends on today’s NFP report.
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