Image Source: Pexels

• The US dollar climbed after the NFP print on Friday.
• US jobs additions soared in September, with upside revisions given to previous months.
• Market hopes for a follow-up outsized rate cut in November were shattered by jobs growth.

The US Dollar Index (DXY) climbed into a fifth consecutive bullish day on Friday, driven higher by better-than-expected US Nonfarm Payrolls figures. A firm showing for US jobs gains and an easing in the US Unemployment Rate hobbled market expectations for a repeat double-cut from the Federal Reserve in November.

The US Unemployment Rate dropped back to 4.1% from the previous 4.2%, further reinforcing a healthier-than-expected landscape in the US labor market. In addition, several months’ worth of NFP releases saw healthy upside revisions. August’s previous NFP total was lifted by an additional 17,000, while July’s figure rose sharply by 55,000, bringing the total up to 144,000.

Annual wage growth also firmed up in September, rising 4.0% year-over-year from the previous 3.9%. Investors had expected September’s Average Hourly Earnings growth to ease back to 3.8%. With wages and net jobs additions having blown well past expectations across the board, rate market expectations of a higher pace of rate cuts took a huge hit to round out a middling-at-best trading week.

According to the CME’s FedWatch Tool, rate trader expectations for the Fed’s November rate call plummeted post-NFP; rate futures speculators now see a 95% chance that the Fed will trim rates by a modest 25 bps on Nov. 7, with the last 5% betting on no movement at all on the Fed funds rate.

US Dollar Price Forecast

The Dollar Index (DXY) has been strong lately, breaking through important levels and going above the 102.00 mark. It recently tested the 50-day Exponential Moving Average (EMA) at the 101.90 level, which could be a significant barrier in the coming days.

The recent price movement seemed to suggest a possible short-term recovery from the earlier downward trend. The next important resistance is the 200-day EMA at around the 103.41 figure. If the index could break above this level, such a move could confirm a change in the overall trend.

Since hitting its lowest point in September, the index has been making higher lows, showing a change in market sentiment in favor of the dollar. If this were to continue, the DXY could then aim for the 103.50-104.00 range, where the 200-day EMA is a major hurdle. If the index couldn't break the 50-day EMA, the index could consolidate or go back down to around the 101.00 mark, with more support at the 100.50 level.

The Dollar Index seemed to be recovering on Friday, with the 50-day and 200-day EMAs seen as important barriers. Breaking above the 103.50 level could mean a longer period of growth, while failing to do so could result in going back down to around the 101.00 area.

DXY Daily Chart

(Click on image to enlarge) 

More By This Author: