Weekly Technical US Dollar Forecast: Finally Turning Higher?

Weekly Technical US Dollar Forecast: Finally Turning Higher?

Technical Forecast for the US Dollar: Neutral

  • The DXY Index has held onto key technical support, suggesting that bulls may have a bit more fight left yet.
  • Net-short US Dollar futures positioning has eased, as the DXY Index has rallied but has not shifted significantly from levels seen going back to mid-December 2020.
  • The IG Client Sentiment Index suggests that the Euro, the largest component of the DXY Index, has a bearish bias in the near-term.

US Dollar Rates - Week in Review

The US Dollar (via the DXY Index) was having a lackluster week until Thursday (even as Fed Chair Jerome Powell testified on Capitol Hill), when it seemed the uptick in US Treasury yields finally spilled over to FX markets, lifting the greenback through Friday into the weekly close. The DXY Index rallied by +0.57%, its second best weekly performance year-to-date, just behind the second week of January (+0.70%).

The US Dollar gauge warded off a significant technical breakdown, and now it appears that the major technical damage is ‘undone’ to an extent. The arrival of the first week of a new month should bring about the usual uptick in volatility in USD-pairs, thanks in part to elevated event risk.

US Economic Calendar for the Week Ahead

The first week of March offers a robust economic calendar, with a global focus during the early part of the week and a US-centric focus following to cap things off. There are several items on the calendar that are worth paying attention to from the US Dollar’s perspective, culminating in the March US labor market report on Friday.

  • On Monday, March 1, the final February US Markit Manufacturing PMI and the February US ISM Manufacturing PMI will be released, as will the January US construction spending figures.
  • Fed Governor Lael Brainard will be giving speeches on Monday and Tuesday.
  • On Wednesday, March 3, the February US ADP employment change report will be released, as will the February US ISM Non-Manufacturing PMI. Later on Wednesday, the Fed Beige Book is due.
  • On Thursday, March 4, focus swings to US labor markets, with the weekly US jobless claims figures out, as well as the January US factory orders report. Fed Chair Powell will give a speech on Thursday, which will likely focus on recent action in US Treasury yields.
  • On Friday, March 5, the February US non-farm payrolls report, as well as the February US unemployment rate, will be released. Later in the day, the US budget plan for fiscal year 2022 will be made public.
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For full US economic data forecasts, view the DailyFX economic calendar.

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