US Dollar Index (DXY) softens ahead of upcoming NFP report

The dollar index has started the new week marking the first day of August, on a bearish trend, approaching a three-week low at 105.5 during the Asian session today. The bears are betting on a possible slowdown in the aggressive interest rate hike by the Fed during their next session in September based on the fears of an imminent recession. Others believe the market is just on a bounce relief this new month as the Fed will embark on its annual retreat in August. This means the following Fed talks on interest rate hikes will be delayed on September 21.

EURUSD started the new week positively, with its price above the support at $1.0227 during the Asian session.

GBPUSD started the week bullish, with prices sitting above the support at $1.2175.

AUDUSD has started the week positively with its price above the support at $0.69826.

NZDUSD has started the week positively with its price above the support at $0.62895.

The commodity market also takes advantage of the current dollar weakness to print new highs again. Thus, we find gold prices beginning the week positively and maintaining their gains from the past month with its price repeatedly kissing the support at $1863 and holding above it.

Silver (XAGUSD) is also pushing higher, with its price above the support at $20.12. 

The crypto market has not been left out either. Hence, we find Bitcoin staying above the support at $23000 while pushing for higher levels.

Ethereum appears bullish than the rest, with prices at a crucial support level of $1684. Altcoins such as: LNKUSD, ADAUSD, DOGUSD, LTCUSD, BNBUSD, UNIUSD, XLMUSD, etc. Have all started the week positively by printing some green candles. 

Nevertheless, investors are currently looking up to the NFP report to be released on Friday to determine the possible trend for the US dollar in this new month of August.

What is the NFP report, and how does it affect the dollar index? 

The term NFP is an acronym for Non-Farm Payroll. The NFP report is vital US labour statistical data that measures the change in the number of employed people during the past month, excluding the farming industry. The NFP report states the present Unemployment Rate, Average Hourly Earnings, and the progress made in job creation. This data is usually released on the first Friday of every month.

Investors often paid great attention to this data and used it to predict the market trend for the rest of the month. Reduced unemployment and improved job creation are always signs of economic progress made in the past month, thereby signalling a bullish trend for the dollar index for the rest of the month.

On the contrary, an increase in the unemployment rate suggests a slowdown in economic progress which is a bad sign for the dollar index. In this case, a bearish trend could be predicted for the dollar index for the rest of the month.

What is the dollar index, and why is it important to investors?

The dollar index (DXY or USDX) is a basket of security measures on the strength of the US dollar against other countries’ currencies.

This data is often essential to investors due to the significant influence the US dollar poses on other currency pairs matched with it in the market. A strong dollar often weakens other currency pairs having the US dollar as their counter currency. On the contrary, when the dollar index is weak, we expect the opposite for these pairs in the same order.

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