Is the Us dollar index a buy ahead of March NFP data?

The US dollar index (DXY) rose slightly on Friday as investors waited for the upcoming non-farm payrolls (NFP) and manufacturing PMI data. It is trading at $98.44, which is higher than this week’s low of $97.66.

Non-farm payrolls

The US economy is going through a mixed period. To a large extent, the economy is doing relatively well, with output in most sectors growing.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

However, the biggest challenge that the economy faces is stagflation. This is a situation where economic growth slows while inflation remains high. Data published in March revealed that the country’s inflation jumped to more than 8% in February.

The labor market has also tightened. Earlier this week, data by the Bureau of Labor Statistics showed that the country’s vacancies remained above 11 million in February. Additional data by ADP revealed that the private sector added over 555k jobs in March.

The next key data to watch will be the US NFP data that will come out on Friday. Analysts believe that the private sector and the government added over 450k jobs in March after they added over 640k in the previous month. 

They also expect these numbers to show that the unemployment rate declined to 3.7% in March while wages rose by over 5.5%. If analysts are accurate, this will be the lowest unemployment rate since the pandemic started. 

Still, these numbers will not change the Federal Reserve’s mind since officials are now focusing on inflation. Therefore even if the numbers disappoint, analysts expect that the bank will deliver a 50 basis point hike in May.

The dollar index will also react to the latest US manufacturing PMI data by Markit and the ISM. Economists believe that the manufacturing PMI remained above 50 in March even though the cost of doing business worsened.

US dollar index forecast

The DXY index has been in a tight range recently. On the four-hour chart, the pair has remained between the important support and resistance levels at $97.7 and $99.50. As a result, it has formed what looks like a horizontal channel and is along the 25-day and 50-day moving averages. 

Therefore, the pair will likely remain in this range for a while even after the latest NFP data. The key level to watch will be at the upper side of the channel at $99.50.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

1. Etoro, trusted by over 13m users worldwide. Register here >
2. bitFlyer, simple, easy to use and regulated. Register here >

*Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.