U.S. Dollar Recovery Ahead Of NFP As Treasury Yields Point To Short-Term Strength

The 10-Year U.S. Treasury Notes chart has so far produced only a three-wave intraday abc corrective recovery, which suggests that the move higher could be part of wave 4 within a potential ending diagonal formation. If this structure is correct, another decline in the final wave 5 could still unfold before a larger reversal takes place.

This Treasury setup is also supporting a short-term recovery in the U.S. Dollar Index (DXY). The dollar has started to bounce on an intraday basis, and the current structure suggests that further upside is possible. Ideally, DXY could be forming wave (c) of an (a)(b)(c) correction within wave "iv", which could push the index toward the 100.0 psychological resistance level before the broader downtrend resumes into wave "v".

Therefore, ahead of today's NFP (U.S. jobs) report, traders should be aware of the possibility of additional short-term dollar strength, potentially even a sharp spike following the data release. However, once the corrective recovery is complete, the dollar could resume its decline, especially if Treasury yields find resistance and bonds regain support.

At the same time, the current risk-on environment remains supportive for equities. Even if stocks experience short-term volatility around the NFP report, the broader uptrend could remain intact, allowing stocks to extend higher once the dollar recovery loses momentum.