US dollar DXY index retreats from yearly highs around 91.60 before NFP

• The DXY index loses some bullish momentum near 91.60.
• The lack of traction in US yields weighs on the dollar.
• NFP non-farm payrolls will focus investors’ attention at the start of the US session.

The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, faces some selling pressure shortly after hitting new yearly highs around 91.60.

DXY US Dollar Index focuses attention on the labor market

The DXY index continues to hold at levels last seen in early December 2020, well above the 91.00 level, although the lack of progress in the recovery of US yields., in particular the 10-year benchmark, seems to be weighing on the dollar on Friday.

Recent optimistic macroeconomic data from the US has further supported the view that the US economy is outperforming the rest of the G10 countries. This vision is also reinforced by the launch of the vaccine in the US, which has reached around 10% of the population compared to a scant 3% in the Old Continent, all further benefiting the rebound in the US dollar.

At the beginning of the American session, the focus will be on the publication of the report of the nonfarm payroll NFP January along with the US unemployment rate The market consensus expects that the economy added 50,000 new jobs in the past month and that the unemployment rate has remained at 6.7%.

What can we expect around the USD?

The dollar’s rise remains strong and has pushed the DXY index to new yearly highs in the 91.60 region on Friday, always supported by weaker sentiment in risk appetite and higher yields in the US bond market. However, occasional bullish attempts in the dollar are expected to remain limited amid the fragile outlook for the dollar in the medium / long term, and always in the context of the current massive fiscal and monetary stimulus in the US economy. ., the Federal Reserve’s “lower for longer” stance and the prospects for a strong recovery in the global economy.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is shedding 0.20% on the day, trading at 91.35. Initial support is at 90.63 (55-day SMA), followed by 89.20 (Jan 6 low) and 88.94 (March 2018 low). On the other hand, a breakout of 91.60 (February 5 high), would open the door to 91.84 (100-day SMA) and finally to 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip).