- The US Dollar strengthens as the Euro (EUR) drops to a 13-month low against the Greenback at 1.0215.
- Strong Employment Report renews inflation concerns, delaying expectations for Fed rate cuts.
- The US Dollar Index (DXY) approaches the 110.00 mark following the Jobs Report.
The US Dollar Index (DXY), which measures the Greenback’s performance against six major currencies, is surging this Friday, driven by a strong US employment report. Nonfarm Payrolls rose by 256,000, a solid number that, while not exceeding the highest estimates, was seen as highly positive and boosted the US Dollar further.
The robust report pushes potential rate cut timelines further out, with October 2025 previously considered as a possible starting point. Given the strength of the labor market, the Federal Reserve is likely to keep interest rates elevated to maintain control over inflation and prevent economic overheating.
Daily Market Movers Digest:
December Jobs Report Highlights:
- Nonfarm Payrolls increased by 256,000, up from 227,000 in November.
- The Unemployment Rate fell to 4.1%, down from 4.2%.
- Average Hourly Earnings eased slightly to 0.3% from 0.4%, in line with expectations.
- University of Michigan January Preview (15:00 GMT):
- Consumer Sentiment Index forecasted at 73.8, slightly below December’s 74.0.
- No forecast for the 5-year Consumer Inflation Expectation, previously at 3.0%.
Market Reaction:
- Equities dip in both Europe and the US following the strong jobs report.
- US 10-year Treasury yields climb to 4.786%, marking a fresh nine-month high after surpassing Wednesday’s 4.728%.
Federal Reserve Outlook:
- The CME FedWatch Tool shows a 93.1% probability of no rate change at the January meeting.
- The Fed is expected to remain data-dependent, with potential inflationary uncertainty as President-elect Donald Trump assumes office on January 20.
US Dollar Index Technical Analysis: Eyeing Key Levels Ahead of Transition
The US Dollar Index (DXY) enters its final days of trading under President Joe Biden, with President-elect Donald Trump’s inauguration set for January 20. Speculation surrounds how much downside remains, as Trump’s inflationary policies are widely expected to boost the US Dollar. Buyers are likely to step in quickly to support the DXY, even in the event of a weaker Nonfarm Payrolls release.
On the upside, the green ascending trend line will be crucial as support, although maintaining it may prove challenging. A break above the 110.00 psychological level could open the door to 110.79, with the next significant target at 113.91, the double top from November 2023.
On the downside, initial support lies at 107.35, which has recently turned into a key barrier. Below this, the 106.52 level and the 55-day Simple Moving Average (SMA) at 106.72 are expected to reinforce support in this region, potentially limiting selling pressure.
