Dollar Index Faces Volatility Ahead of NFP Report

The US dollar index (DXY) is expected to be volatile in September, as indicated by historical seasonality patterns and the upcoming nonfarm payrolls (NFP) report. According to a recent analysis by City Index UK, the DXY has historically been relatively balanced in terms of direction during September, with an average return of just 0.1% and a median return of 0.05%. However, volatility has typically been higher in September, with an average high-to-low range of 3.8%, making it the third most volatile month of the year.

The analysis also looked at the performance of the DXY around NFP releases, which tend to be more useful as a volatility event than a directional signal. The data shows that NFP day has delivered the highest average daily range at 0.77%, with volatility building into the release. While there are some modest directional tendencies either side of the release, none are strong enough to consider standalone trading signals.

The DXY is currently rebounding towards resistance around 100-101, which could be a key area to watch in the near term. However, traders remain cautious ahead of the upcoming NFP report and Fed policy clues, which could lead to further volatility in the dollar index.