Dollar Index Likely to Remain Range Bound Ahead of NFPs | Learn Forex | GoLearnForex.com

The Dow Jones FXCM Dollar Index continues to trade in a range bound fashion as traders remain largely sidelined ahead of some key data still to come this week. The headline release is the non-farm payrolls release out of the US on Friday but we could also see some volatility tomorrow as the ECB announces interest rates and ECB President Trichet talks to the press as usual after the release at 12:30GMT. However, unless the ECB or Trichet do something massively unexpected, which is very unlikely, then we expect the dollar index to continue to trade in the range bound fashion it has been doing for the last few days as illustrated in the hourly chart above.

Come Friday, however, we expect to see this recent range bound trade end as players take positions ahead of, and react after, the NFP release. Naturally the content of the data will denote the direction of trade, however, considering the weakening jobs market in the US, and a possible early glance at data with ADP data released tomorrow, we favour initiating USD shorts in anticipation of a weak showing.

Written by Jonathan Granby, DailyFX Research Team