US dollar index (DXY) trading idea
After Tuesday's sharp strengthening caused by the rhetoric of Jerome Powell's speech to the U.S. Congress, the DXY slowed its recovery on Thursday, but still remains just below the 106.00 level.
Investors are in no hurry to form new positions, preferring to wait for Friday's release of the U.S. labor market report.
The Fed chief confirmed the regulator's readiness to continue tightening financial conditions and did not rule out a 50 basis points rate hike in March. Jerome Powell called a rate hike the most effective way to combat high inflation, which, while beginning to slow down, is still well above the central bank's targets.
Jerome Powell again urged market participants to refrain from speculations about the premature end of the Fed's tightening policy. Moreover, the head of the regulator said that economic indicators will allow the rate to rise above the initially indicated levels and leave it at its maximum values for longer than planned. Markets have revised up their forecasts for a rate hike from 5.25-5.50% to 5.75-6.0%.
Yesterday the dollar was supported by the U.S. labor market report from ADP. According to the data, employment rose by 242,000 in February against a forecast of 200,000.
The Non-farm Payrolls will be released tomorrow at 13:30 GMT, which also promises not to disappoint the investors, and hence the dollar index will strengthen its positions against other indexes.
We suggest placing a pending order at DXY:
- Buy-stop 105.60 take-profit 107.00 stop-loss 105.10