DXY: US dollar index steady ahead of NFP and Powell speech

The US dollar index (DXY) rose ahead of an important speech by Jerome Powell and the upcoming nonfarm payroll (NFP) data. The index is trading at $91.14, which is 1.50% above the lowest level last week.

Jerome Powell speech

The dollar has risen against most currencies as forex investors wait for a statement by Powel. He will speak at the Wall Street Journal job summit.

This speech is important because of the recent performance of US government bonds. The yields on the 10-year, 5-year, and 30-year US government bonds have risen to the highest level in more than 12 months. This has happened as investors have sold government bonds in large quantities recently. In the bond market, yields move inversely to prices.

Investors believe that the US economy will have a faster recovery, helped by the upcoming $1.9 trillion stimulus package. A quicker recovery, on the other hand, will lead to intervention by the Fed. It could raise interest rates and taper its asset purchases. In today’s speech, analysts will want to see whether Powell will change his language. An analyst from a popular forex and CFD broker said:

“With US inflation expectations over the next five years reaching a 13-year high and long term-borrowing costs on the rise, central banks face tough challenges comforting investors.”

The US dollar index is also rising ahead of tomorrow’s nonfarm payroll numbers. Economists polled by Reuters expect the overall job market to make modest gains. The median estimate is that the economy added 182,000 jobs last month. Also, they predict that the unemployment rate dropped to 6.1% in January while wages rose by 5%.

On Wednesday, data by ADP Institute showed that the economy added just 117,000 jobs in January. While the ADP data is usually important, it is usually substantially different from the one published by the government.

US dollar index analysis

The dollar index has been relatively volatile in the past few days. It is trading at $91.15, which is slightly above the 15-period and 25-period exponential moving averages (EMA). The price is below last week’s high of $91.15 while the Relative Strength Index (RSI) has been rising. Therefore, in the near term, it may continue rising as bulls target the important resistance at $91.60. However, a decline below $90.62 will invalidate this trend.