The US Dollar Index

The dollar index remains stable on Friday morning after rising by 0.5% on Thursday, but the range narrows ahead of today’s important release, the US NFP data.

The daily chart picture is still bullish as long as the 14-day momentum indicator is above the centerline, the moving averages are in a bullish setup, and Thursday’s bullish engulfing pattern provided additional support. However, a new upswing still needs to continue to the upside and close above 103.80 (Fibo 61.8% of 104.37/102.84 pullback) in order to generate a reversal signal and mark a higher low at 102.55

On the other hand, fundamentals are expected to be important today, with the NFP statistics determining the near-term course of the dollar.

Recent US economic statistics (weaker Q2 GDP, plummeted job opportunities, drop in consumer confidence, and private sector jobs report below estimates) dismayed markets and increased concerns of a more pronounced economic slowdown.

The median projection anticipates 170K new jobs to be added in August, down from 187K the month prior, with any large departure from the consensus expected to have a stronger influence on the value of the dollar.

In general, weaker-than-expected August data would signal a weakening of the currently tight US labor market, a growing negative impact of high interest rates, and a recommendation that the Fed keep interest rates unchanged.

When the critical support around 102.85 (200 DMA) is broken, the dollar might see greater pressure due to a bigger NFP miss and a potential drop into objectives at 102.40 and 101.90.

A positive NFP result, on the other hand, would provide new support and strengthen the dollar.

Sup: 103.00; 102.50.

Res: 103.85; 104.00; 104.60.

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