US dollar index forecast ahead of BOC and ECB rate decisions

The US dollar index retreated on Friday after the relatively mixed American employment numbers. The index is trading at $92.11, which is slightly above last week’s low at $91.95. 

US dollar index weekly forecast

The DXY index struggled on Friday when the Bureau of Labor Statistics (BLS) published the August non-farm payrolls data. The numbers showed that the American hiring labor market slowed dramatically in August even as many companies struggled to find workers.

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The economy added 235k jobs in August, which was substantially lower than the previous month’s increase of more than 1.1 million. The data was also substantially lower than Wednesday’s estimate of more than 374k. 

Still, other parts of the labour market were modestly strong. For example, the country’s unemployment rate declined from 5.4% in July to 5.2% in August. This was the lowest rate since the pandemic started. 

Additionally, the numbers revealed that wages rose at an annualised rate of 4.3% in August after rising by 4.0% in the previous month. The participation rate rose by 6.7%. 

These numbers, coupled with the high vacancy rates and the falling initial jobless claims show that the overall labour market remains strong even after the disappointing jobs data.

This week, the US dollar index will react to economic numbers and events from other parts of the world. The most important movers wil be the European Central Bank (ECB) interest rate decision on Thursday. This will be an important number since the euro is the biggest constituent of the DXY. Analysts expect that the ECB will turn a bit hawkish on Thursday.

Other numbers that will move the DXY will be the Japan and Eurozone GDP data that will come on Tuesday and the Bank of Canada (BOC) interest rate decision scheduled for Wednesday. 

DXY technical forecast

Dollar Index

The three-hour chart shows that the US dollar index has been in a sharp downward trend recently. The index has dropped by more than 1.70% from the highest point on August 20th. Along the way, the index has moved slightly below the 25-day and 15-day exponential moving averages (EMA). It has also moved below the key support level at $92.47 on the three-hour chart. 

Therefore, the index price will likely maintain the bearish trend ahead of the ECB and Bank of Canada decision. The next key level to watch will be at $91.78.

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