Dollar index rises to multi-day highs near 107.00

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  • The index gets extra pace after July’s NFPs.
  • The US economy created more jobs than expected last month.
  • The US unemployment rate fell to 3.5% in July.

The USD, in terms of US dollar index (DXY)accelerates the gains until reaching new monthly highs around 107.00 on Friday.

US dollar index is buoyed by payroll figures
The index rebounds strongly and is already flirting with the 107.00 area after strong US Non-Farm Payroll numbers for July.

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In fact, the dollar’s bullish momentum picked up speed after the US economy added 528,000 jobs last month, versus the market consensus for a gain of 250,000. Furthermore, the unemployment rate fell to 3.5%, while average hourly earnings also surprised to the upside, rising 0.5% MoM and 5.2% in the last twelve months.

The strong rebound in the index is reinforced by the equally strong rebound in US yields across the curve. In fact, the short end is back to multi-week highs above 3.25% as speculation of a faster Fed normalization has started to run high among investors.

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What to watch out for around the dollar

Higher-than-expected July payroll results seem to have reignited the perception of a more aggressive rate path from the Fed in the coming months, lending additional support to both the dollar and yields.

The Fed’s divergence from most of its G10 counterparts (especially the ECB), coupled with geopolitical turmoil and the occasional resurgence of risk aversion, also reinforce the constructive outlook for the dollar.

Looming Issues in the Back Cauldron: Hard/Soft/Soft Landing for the US Economy. Escalation of the geopolitical effervescence against Russia and China. More aggressive Fed rate path this year and in 2023. Trade conflict between the US and China. Future of Biden’s Build Better plan.

Technical levels

Now the index is gaining 0.93% at 106.73 and a break above 107.42 (post-FOMC weekly high Jul 27) would expose 109.29 (15 Jul 2022 high) then 109.77 (monthly high Sep of 2002). Elsewhere, the next support is at 105.04 (monthly low Aug 2), followed by 104.96 (55-day SMA) and finally 103.67 (weekly low Jun 27).

Source: Fx Street

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