ECB rate cut and NFPs await the DXYThe DXY dropped to fresh yearly lows at 106.13 since my previous idea which does not bode well for my string of ideas calling for the DXY to break above 110.16. The DXY however managed to climb back above the blue support range between 107.12 and 107.50 at the back end of last week off the back of a stronger than expected durable goods orders m-o-m print of 3.1% while the 4Q2024 GDP print and the m-o-m Core PCE price index landed in line with expectations at 2.3% and 0.3%, respectively.
The headlining events for this week is the ECB interest rate meeting and the NFPs for February. Market expectations are for the ECB to cut rates from 2.9% to 2.65%. The ECB has held a more dovish stance than the Fed since the rate cutting cycle began and if it’s more of the same on Thursday, I expect the DXY to find strong footing which will allow it to re-test the 50-day MA at 107.98. Most of the focus will however be on the US non-farm payroll print for February.
The NFPs print for January came in slightly lower than expected and another weak print on Friday will have investors question the validity of Powell’s statement that the US economy is strong and that the Fed is in no rush to cut interest rates, which I expect will be dollar negative. A strong print however will allow the DXY to hold levels above the 50-day MA and test levels closer to the 61.8% Fibo retracement at 108.97.
