The dollar index steadies on Friday morning following 0.5% advance on Thursday, but range narrows ahead of key release today – US NFP report.
Daily chart picture remains positive as 14-d momentum indicator stays above the centreline and moving averages are in bullish setup, with additional support from Thursday’s bullish engulfing pattern, but fresh recovery still requires more work at the upside and close above 103.80 (Fibo 61.8% of 104.37/102.84 pullback) to generate reversal signal and mark a higher low at 102.84 (Aug 30 low).
On the other hand, fundamentals are likely to play a key role today, with NFP numbers to define dollar’s near-term direction.
Markets were discouraged by recent US economic data (weaker Q2 GDP, job openings plunged, drop in consumer confidence and private sector jobs report below expectations) which boost concerns about stronger economic slowdown.
Median forecast shows expectations for 170K new jobs added in August, vs 187K previous month, with any significant divergence from consensus to cause stronger impact to the greenback.
Generally, softer than expected Aug numbers would warn that conditions in so far tight US labor market are weakening, indicating growing negative impact from high interest rates and suggesting that Fed should stay on hold with interest rates.
The dollar may come under increased pressure on stronger NFP miss and risk drop towards targets at 102.40/101.90, on break of pivotal support at 102.85 (200DMA).
Alternatively, strong NFP beat would offer fresh support and lift the dollar.
Res: 103.80; 104.01; 104.37; 104.59.
Sup: 103.43; 103.16; 102.92; 102.40.
