- The DXY index leaves behind Thursday’s retracement and advances to 94.30.
- US 10-year yields are approaching the key 1.60% level on Friday.
- All attention will be on the NFP Nonfarm Payrolls at the start of the American session.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, quickly leaves Thursday’s negative price action behind and registers modest gains around 94.30 during the European session on Friday.
US dollar DXY index focuses attention on the NFP
The DXY index advances for the fifth week in a row on Friday, moving at levels last seen in September 2020 and gradually approaching the 200-week SMA above the 94.70 level.
In the meantime, US yields extend upward movement and they trade around 0.32% in the short term of the curve and are close to 1.60% in the 10-year benchmark bond.
The sale in the bond market was maintained after US authorities reached a truce that has extended federal government funding until December.
Regarding the US data, nonfarm payrolls NFP for the month of September they will be the center of attention, with the market consensus seeing that the economy added 500,000 jobs last month, while the unemployment rate is seen at 5.1% (down from 5.2%).
What can we expect around the USD?
The DXY index remains firm on its weekly rise above the 94.00 level and ahead of the critical NFP for the month of September. Positive news in front of the debt ceiling sponsored selling in the debt market and drove yields higher. Looking beyond the immediate term, the dollar remains supported by the adjustment of the markets to the prospects of a “soon” start to the process of reduction in the purchase of assets of the Fed, the probable increases of rates at some point during the next year and the growing view that high inflation could last longer than initially expected. Positive US fundamentals, along with diminishing concerns about Delta variant progress, should also add to the constructive view on the dollar in the short / medium term.
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 94.26. A break above 94.50 (September 30 high), would open the door to 94.74 (September 2020 high) and then 94.76 (200-week SMA). On the other hand, the next support is at 93.67 (October 4 low), followed by 93.51 (20-day SMA) and finally 92.98 (September 23 low).
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