US Dollar Index Price Forecast: How is safe-haven demand supporting a recovery above the 20-day EMA ahead of US NFP?

  • Safe-haven demand fuelled by the AI rout lifts the US Dollar Index towards 101.95.
  • October’s US NFP release, due at 13:30 GMT, is firmly in investors’ focus.
  • Expectations for the Fed’s monetary policy are unlikely to change significantly following the US NFP figures.

Stronger demand for safe-haven assets is driving a sharp rise in the US Dollar (USD) against its major currency peers. An intensifying sell-off in Artificial Intelligence (AI) infrastructure stocks has triggered global sector rotation, supporting the shift towards safety.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

At the time of writing, a 0.35% gain takes the US Dollar Index (DXY) to around 101.95. The index tracks the Greenback against six major currencies.

How Is The US Dollar Performing Today?

The US Dollar recorded its strongest performance against the Australian Dollar today. The table below sets out the percentage changes in the US Dollar (USD) against the major currencies listed.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.29% 0.34% 0.05% 0.38% 0.81% 0.75% 0.04%
EUR -0.29% 0.04% -0.26% 0.09% 0.52% 0.45% -0.25%
GBP -0.34% -0.04% -0.30% 0.05% 0.48% 0.40% -0.30%
JPY -0.05% 0.26% 0.30% 0.35% 0.78% 0.70% 0.00%
CAD -0.38% -0.09% -0.05% -0.35% 0.42% 0.35% -0.35%
AUD -0.81% -0.52% -0.48% -0.78% -0.42% -0.08% -0.77%
NZD -0.75% -0.45% -0.40% -0.70% -0.35% 0.08% -0.69%
CHF -0.04% 0.25% 0.30% -0.01% 0.35% 0.77% 0.69%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the US Dollar on the left and following that row across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.

Why are defensives outperforming as the AI unwind hits US equities?

Selling has extended well beyond technology stocks, with Danske Bank strategists saying the recent “AI unwind escalated into an outright rout yesterday and took the whole US market with it,”. To illustrate the scale of the losses, they note that “the S&P 500 fell 4.4%, with every sector lower and IT leading the declines, while the Nasdaq Composite lost 5.5% and the Nasdaq 100 6.4%, its worst session since March 2020.” Danske also stresses that “defensives held up far better, so this was rotation within equities as much as money leaving them,” indicating a substantial change in sector positioning rather than an indiscriminate withdrawal from risk assets.

Attention on the economic calendar centres on October’s United States (US) Nonfarm Payrolls (NFP) report, due at 13:30 GMT and keenly awaited by investors.

Estimates point to 65K new hires by US employers, up from September’s 29K, while the Unemployment Rate is expected to remain unchanged at 4.2%.

Wage growth, as measured by Average Hourly Earnings, is forecast to moderate to 2.9% Year-on-year (YoY) from 3% in September. The monthly increase, however, is projected at 0.3%, compared with the previous reading of 0.1%.

Why is the Dollar’s response to jobs data becoming less predictable?

A clear directional response to labour figures is no longer evident in the US currency, according to Commerzbank. The bank notes that recent payroll reports have prompted increasingly subdued and uneven moves in foreign exchange markets. In its words, “the US dollar does not seem entirely sure how to react to the labour market figures,” leading it to suggest that, “barring any major surprises, we might be in for a fairly relaxed end to the week.”

US Dollar Index Technical Analysis: Can The Bullish Bias Hold?

Holding above the 20-day exponential moving average (EMA) of 101.79 gives Dollar Index Spot a mildly bullish near-term bias, with the daily chart showing a price of 101.86. This positioning points to underlying buying interest following the recent consolidation. Meanwhile, a Relative Strength Index (RSI) reading of 53.26 remains neutral, indicating positive momentum without signs of overextension.

The 20-day EMA around 101.79 offers the first downside support. Close by, the session’s opening level near 101.86 serves as a pivot that must hold to maintain the positive tone. A sustained move beneath this support zone would suggest weakening buying pressure and leave scope for a deeper correction towards the recent lows around 101.00. On the upside, a sustained hold above the 20-day EMA is needed for the pair to revisit the yearly high near 103.00.

(The technical analysis of this story was written with the help of an AI tool. Know more.)