The US dollar index (DXY) has fallen in the past six straight days. It is trading at $95.25, which is about 2.2% below the highest level in January. It is also trading at the lowest point since January 19th.
Non-farm payrolls data ahead
The DXY index has declined sharply because of the performance of other key currencies in the index. For example, the euro rose sharply on Thursday after the relatively hawkish comments by Christine Lagarde, the ECB chair.
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Similarly, the British pound jumped after the latest interest rate decision by the Bank of England (BOE). in it, the central bank decided to hike interest rates by another 0.25%. This made it the first time that the central bank has hiked rates on a back-to-back basis since 2004.
Analysts expect that other central banks will also turn hawkish. For example, in Australia, the Reserve Bank governor said that there is a possibility that it will hike interest rates this year. The Bank of Canada has also been hawkish lately.
Focus now shifts to the upcoming American jobs numbers that will come out later today. Analysts expect that the data will be a bit weak. For example, the consensus estimate is that the economy added 150k jobs in January after it added 211k in the previous month.
Data published by ADP on Wednesday revealed that the private sector actually lost jobs in January. Further numbers revealed that the number of vacancies has been rising.
The dollar index will also react to the unemployment rate. The consensus is that the unemployment rate remained intact at 3.9% while the average hourly earnings rose by 5.2%.
These numbers will come a week after the Fed delivered a relatively hawkish rate decision. The bank hinted that it will deliver a few hikes later this year.
US Dollar index forecast
The daily chart shows that the DXY index has been in a strong bearish trend in the past few days. As a result, it has moved below the 23.6% Fibonacci retracement level. It has even fallen below the 25-day and 50-day moving averages. Oscillator like the Stochastic has also pointed lower.
Therefore, the outlook of the dollar index is a bit dovish ahead of jobs data. If this happens, the next key point to watch will be at $94.31, which is along the 38.2% Fibonacci retracement level.
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Source: https://invezz.com/news/2022/02/04/dxy-should-you-buy-the-dollar-index-ahead-of-us-nfp-data/