US Dollar goes for fifth straight day of losses ahead of NFP
- The US Dollar is facing its worst week in over one year.
- Traders are weakening the Greenback further ahead of the US employment report.
- The US Dollar Index faces devastation and devalues over 3.5% so far this week.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is having its most horrible week in more than a year, losing over 3.5% since Monday and trading near 103.70 at the time of writing on Friday. The Greenback is undergoing a regime shift where the US Dollar is no longer in the graces of traders. The interest rate differential between the Federal Reserve (Fed) and other central banks is set to narrow after Fed Governor Christopher Waller said on Thursday that there might be two to three rate cuts this year.
On the economic data front, all eyes are on the Nonfarm Payrolls release this Friday. Expectations are for 160,000 jobs gained in February, though the analysts' range could not be wider, with a small 30,000 on the low estimate and the high estimate at 300,000. That means that any print towards 30,000 or even negative could mean another severe leg lower for the Greenback.
Daily digest market movers: NFP already tilted?
- At 13:30 GMT, the US employment report for February is due:
- The Nonfarm Payrolls are expected to come in at 160,000 against the previous 143,000 reading from January.
- The Average Hourly Earnings month-on-month are set to soften to 0.3% against 0.5%.
- The Unemployment Rate should remain steady at 4%.
- At 15:15 GMT, Fed Governor Michelle W. Bowman discusses "Monetary Policy Transmission Post-COVID" at The University of Chicago Booth School of Business 2025 US Monetary Policy Forum in New York.
- At 15:45 GMT, Federal Reserve Bank of New York President John Williams participates in a discussion of the US Monetary Policy Forum Report titled "Monetary Policy Transmission Post-Covid" at the University of Chicago Booth School of Business in Chicago, Illinois.
- At 17:20 GMT, Fed Governor Adriana Kugler speaks on 'The Rebalancing of Labor Markets Across the World' at the Bank of Portugal's Conference on Monetary Policy Transmission and the Labor Market in Lisbon, Portugal.
- At 17:30 GMT, Fed Chair Jerome Powell delivers a speech on the economic outlook at The University of Chicago Booth School of Business 2025 U.S. Monetary Policy Forum in New York.
- At 18:00 GMT, Fed Governor Adriana Kugler delivers a speech on the economic outlook at the University of Chicago Booth School of Business 2025 U.S. Monetary Policy Forum, in New York.
- Equities look very split this Friday with European indices in the red while US futures are marginally in the green.
- After recent US economic data and Fed policymakers’ comments, the CME Fedwatch Tool projects a 46.8% chance of an interest rate cut in the May meeting compared to a 33.3% probability one week ago.
- The US 10-year yield trades around 4.26%, off its near five-month low of 4.10% printed on Tuesday.
US Dollar Index Technical Analysis: NFP at the worst moment
The US Dollar Index (DXY) is facing a chunky loss this week, with over 3.5% in the red at the time of writing on Friday. The question is whether the Nonfarm Payrolls report can push back and deliver some relief on these losses. However, markets will want to see if the Department of Government Efficiency (DOGE) effect is already impacting the unemployment rate and the change in the Nonfarm Payrolls going forward.
With this week’s sharp decline, the 104.00 round level is being broken at the time of writing on Friday and looks unfit to see a return soon. Further up, the first upside target is to recover the 105.00 round level and the 200-day Simple Moving Average (SMA) at 105.03. Once that zone has been recovered, several near-term resistances are lined up, with 105.53 and 105.89 identified as two heavy pivotal levels before breaking back above 106.00.
On the downside, the 103.00 round level could be considered a bearish target in case US yields roll off again, with even 101.90 not unthinkable if markets further capitulate on their long-term US Dollar holdings.
US Dollar Index: Daily Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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