US Dollar recovers some of previous losses with all eyes on NFP and Powell speech

• The Greenback is partially recovering lost ground against most major peers. 
• Focus shifts now to the Nonfarm Payrolls and Fed Chairman Jerome Powell speaking. 
• The US Dollar Index is heading back above 102.00. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is trying to recover while trading around 102.50 at the time of writing on Friday. The dust is settling on United States (US) President Donald Trump's reciprocal tariffs. The focus now shifts towards the Nonfarm Payrolls (NFP) data release and Federal Reserve (Fed) Chair Jerome Powell's speech up next. 

On the economic calendar front, expectations for the NFP range from 80,000 to 200,000, with the consensus view at 135,000 for March's performance. Seeing the slide in JOLTS Job Openings and the surge in Challenger Job Cuts announcements this week, the question will be if that 135,000 is not an overly-elevated expectation. Markets can look for guidance from Powell, who will speak briefly thereafter. 

Daily digest market movers: Last NFP standing

• At 12:30 GMT, US employment data for March will be released:
• • Nonfarm Payrolls are expected to come in at 135,000 compared to 151,000 in February. A drop below 80,000 could see some more USD weakness whereas a number above 200,000 would see a stronger USD.
  • The monthly Average Hourly Earnings should remain stable at 0.3%.
  • The Unemployment Rate is expected to come in at 4.1% as in February.
• At 15:25 GMT, Federal Reserve Chair Jerome Powell speaks about the economic outlook at the Society for Advancing Business Editing and Writing (SABEW) Annual Conference. 
• At 16:00 GMT, Fed Governor Michael Barr will speak on AI and Banking. 
• Fed Governor Chris Waller will speak at 16:45 GMT on Payments at a New York Fed Conference. 
• Asian and European Equities sink again between 1% to 2% on average. US futures are looking heavy as well ahead of the US opening bell, though losses are contained to less than 1%. 
• According to the CME Fedwatch Tool, the probability of interest rates remaining at the current range of 4.25%-4.50% in May's meeting is 68.1%, coming from 81.5% last week. For June's meeting, the odds for borrowing costs being lower stand at 92.6%, whereas only last week, the odds were roughly 81.1%.
• The US 10-year yields trade around 3.95%, a fresh five-month low with the next low to bear near 3.69% from the beginning of October 2024.

US Dollar Index Technical Analysis: There goes the pendulum

The pendulum is swinging for the US Dollar Index, with strength on the left and weakness on the right. On the left, there have been years of US Dollar strength, which was perceived as a market standard. However, since the start of March - with the defense budget spending bill in Germany and US President Donald Trump in office - the pendulum for the DXY has swung. More US Dollar weakness is likely once the tariff impact on the US economy starts to take its effect. As stagflation and recession fears are picking up, the DXY could easily fall below 100.00 later this year.

With the sizable downward move on Thursday, some support levels have turned into resistance. The first level to watch out for is 103.18, which has been held as support throughout March. Above there, the 104.00 pivotal level and the 200-day Simple Moving Average (SMA) at 104.89 come into play. 

On the downside, 101.90 is the first line of defense and it should be able to trigger a bounce as the Relative Strength Index (RSI) momentum indicator is issuing warnings of oversold conditions on the daily chart. Maybe not this Friday, but in the coming days, a break below 101.90 could see a leg lower towards 100.00. 

US Dollar Index: Daily Chart