Dollar Index remains subdued ahead of U.S. NFP report release
The dollar index traded within a tight range on Friday morning in anticipation of the U.S. non-farm payrolls (NFP) report but remained under pressure after dropping 0.5% in the previous session. This decline signaled initial bearish momentum as the index closed below the bullish channel support at 106.08, which coincides with the 23.6% Fibonacci retracement level of the 99.87–108.04 rally.
Fresh bearish momentum stalled just above key support levels at 105.65/57 (daily Kijun-sen and Nov 27 higher low). These levels are critical for maintaining a near-term bearish bias, as long as the index remains above them.
Daily technical indicators are mixed. While the 10/20-day moving averages (DMA) have formed a bearish crossover, the 55/200 DMA maintains a golden cross, indicating longer-term bullish strength. Additionally, the 14-day momentum indicator is trending higher but remains in negative territory, reflecting uncertainty.
A confirmed break below the 105.65/57 pivot would complete a failure swing pattern on the daily chart, paving the way for a deeper decline, with the 105.00 zone acting as the next significant support. Conversely, a rebound and a potential weekly close back within the bull channel would indicate a rejection of the downside and suggest the formation of a double bottom, signaling renewed bullish potential.
The dollar’s next move hinges on the U.S. November labor market data, with NFP expected to show an increase of 200,000 jobs, rebounding from October’s unusually low 12,000 figure, which was affected by a hurricane and Boeing employee strikes.
Average hourly earnings are forecasted to rise by 0.3%, slightly below the 0.4% increase in October, while inflation is expected to edge up to 4.2% from 4.1%.
Overall, the labor market data points to healthy moderation, aligning with the Federal Reserve’s signals for a likely 25-basis-point rate cut in the next policy meeting. However, any significant deviation in the NFP figures from expectations could drive stronger moves, with an upside surprise bolstering the dollar, while weaker-than-expected data may increase selling pressure.
Res: 106.10; 106.24; 106.71; 107.00
Sup: 105.57; 105.00; 104.50; 104.08
