US Dollar Technical Forecast: USD Prints Hammer Candle Following Blockbuster NFP Report


The US Dollar has had an interesting week with the FOMC meeting and host of key data events potentially setting the tone for the rest of the quarter. The FOMC meeting saw a 25bps hike which was followed by dovish comments from Fed Chair Jerome Powell whose use of the word ‘disinflation’ sent the dollar tumbling and risk assets higher.

Friday however brought the NFP report, unemployment rate and of course the average hourly wage growth. The NFP report smashed estimates with a print of 517000 new jobs added, the highest since August 2022. The unemployment rate also came in better than expected falling to 3.4%, a low last seen in 1969. The only silver lining being that average hourly wage growth remained at 0.3% MoM, however with the tightness persisting in the labor market wage growth could soon face renewed pressure. Fed Chair Powell in his press conference mentioned that the resilience of the labor market is encouraging but cautioned that some weakening would be necessary for the Fed to achieve their inflation target of 2%. Friday’s data has seen the probability of a further 25bps hike in March rise to 97% up from 82% before the release of the NFP report with the dollar index finding some much-needed support.

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Source: TradingView, prepared by Zain Vawda

From a technical perspective, the weekly chart for the dollar index (DXY) is on course to print a hammer weekly candle close which hints at further upside in the week ahead. The previous two weeks closed as a doji candlestick which did provide a sign that a reversal may be incoming, however following the FOMC meeting the dollar index broke below the 101.00 level and appeared vulnerable. A push higher on the weekly faces’ resistance around the 103.50 with a break bringing the 100-day MA at 105.00 into play.

US Dollar Index Daily Chart

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The daily timeframe finally saw a breakout of the 13-day trading range before closing back inside the range on Thursday. False breakout? Looks like it is following Friday’s NFP, which resulted in a test of the top of the range around 103 and looking likely to close above 50-day MA. Should we get a daily candle close above the 50-day MA the 100-day MA line up with the resistance level mentioned above, around the 103.50 level.

 Given the data on Friday as well as the price action a break back below the range seems unlikely. However, should we get a candle close back below the range we could be in for a push below the 100.00 mark which we haven’t seen since April 2022.


USD/CAD Daily Chart

image4.pngSource: TradingView, prepared by Zain Vawda

USD/CAD has found support at the November 2022 swing low just above the 200-day MA. A daily candle close outside the falling wedge pattern and the horizontal resistance at 1.3390 should lead to further upside in the week ahead. Resistance may be provided by the 50-day MA which lines up with horizontal resistance around the psychological 1.3500 level with the 100-day MA resting slightly higher.

Given the recent announcement by the Bank of Canada (BoC) of their intention to pause interest rate hikes the fundamentals seem to support further upside for the pair.


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