US dollar DXY index hits 2021 highs and approaches 92.00 level before NFP

• The DXY Index extends the rally above 91.70 on new yearly highs.
• Yields maintain their upward movement relentlessly and are targeting 1.60%.
• The US NFP Non-Farm Payroll Report stands out on today’s economic calendar.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends momentum to the upside and is approaching the 92.00 level on Friday.

US dollar DXY index rises on yields and awaits NFP

The DXY index advances for the third day in a row and is gradually approaching the key barrier at the 92.00 level, always supported by continued upward movement in real US yields.

Supporting the above, the president Powell showed no concern on the persistent moderate rise in yields. In addition, the superior performance of the US economy compared to the rest of the G-10 countries, together with the strong rate of vaccination, continues to support the dollar.

When it comes to today’s economic data, all attention will be on the US labor market report, where the economy is expected to have created 182,000 jobs and the unemployment rate remains unchanged in the US. 6.3% in February.

What can we expect around the USD?

Sentiment around the dollar remains strong and pushes the DXY index close to the 92.00 region. The reversal of recent dollar weakness came in tandem with a sharp rebound in bond yields to the levels last recorded a year ago, all against the background of mounting investor concerns about the likelihood of higher inflation in the coming months. In fact, market participants appear to be looking beyond the Fed’s mega-accommodative stance (until “additional substantial progress” is seen) and the impending additional fiscal stimulus, reinforcing renewed interest in the dollar.

Key events this week in the US: NFP Nonfarm Payrolls (Friday).

Eminent Background Issues: Trade conflict between the United States and China under the Biden administration. Reduction of speculation in the face of economic recovery. Real US interest rates versus Europe. Could US fiscal stimulus cause overheating? Future of the Republican Party after Trump’s acquittal.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is gaining 0.08% on the day, trading at 91.71. A breakout of 91.77 (March 5 high), would open the door to 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip) and finally to 92.93 (200-day SMA). On the other hand, the next support is at 90.47 (50-day SMA), followed by 89.68 (February 25 low) and 89.20 (January 6 low).