US Dollar Price Forecast: Investors Retreat to USD Sanctuary

USD FUNDAMENTAL BACKDROP

The Dollar Index (DXY) has maintained its elevated levels today after the Fitch ratings agency downgrade as the safe-haven aspect of the greenback comes into play – investors have been moving out of riskier asset classes including equities and seeking low risk options that include the USD from an FX point of view. Yesterday’s ADP employment change beat added to the bullish bias short-term as markets prepare for the upcoming Non-Farm Payroll (NFP) report on Friday.

Today’s focus (see economic calendar below) will be on initial jobless claims and US ISM services PMI’s, both of which are expected to show a moderation in the US economy. Unless actual figures on jobless claims exceed estimates and services significantly miss, the USD is likely to remain buoyant at current levels. As mentioned above, the NFP report will dominate the weeks economic data considering ADP numbers have not been a reliable gauge for the NFP print of recent, markets are adopting a cautious approach until NFP’s are released.

US ECONOMIC CALENDAR (GMT +02:00)

TECHNICAL ANALYSIS

U.S. DOLLAR INDEX DAILY CHART

Daily DXY price action has pushed above the 102.50 psychological handle coinciding with the 50-day moving average (yellow). Bulls will now eye the medium-term trendline resistance (black) that has not been breached since early November 2022. A move towards this resistance zone could see the Relative Strength Index (RSI) move into overbought territory; suggestive of upside fatigue.