US Dollar Index resumes the upside near 94.30 ahead of NFP

• DXY leaves behind Thursday’s pullback and advances to 94.30.
• US 10-year yields approach the key 1.60% level on Friday.
• All the attention will be on the Nonfarm Payrolls later in the NA session.

The greenback quickly leaves behind Thursday’s negative price action and posts modest gains around 94.30 on Friday, always measured by the US Dollar Index (DXY).

US Dollar Index focused on Payrolls

The index advances for the fifth consecutive week on Friday, navigating levels last seen in September 2020 and gradually approaching the key 200-week SMA past the 94.7 yardstick.

US yields, in the meantime, extend the march north and trade close to the 0.32% level in the short end of the curve and approach the 1.60% when it comes to the 10-year benchmark note. The closely watched 2y-10y yield gap rose by 3bps to 126 pts on Thursday.

The selloff in the bonds market was sustained further after US policymakers reached a truce that extended the funding of the federal government to December.

In the US calendar, the Nonfarm Payrolls for the month of September will take centre stage, with market consensus seeing the economy to have added 500K jobs during last month, while the jobless rate is seen at 5.1% (from 5.2%).

What to look for around USD

The index keeps the weekly upside well and sound above the 94.00 mark and ahead of the critical NFP for the month of September. Positive news from the debt-ceiling front sponsored the selloff in the debt market and propelled yields higher. Looking beyond the immediate term, the dollar remains underpinned by markets’ adjustment to prospects for a “soon” start of the tapering process, probable rate hikes at some point during next year and the rising view that elevated inflation could last more than initially expected. Positive results from US fundamentals coupled with alleviating concerns regarding the progress of the Delta variant should also add to the constructive view of the dollar in the near/medium term.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Wholesale Inventories (Friday).

US Dollar Index relevant levels

Now, the index is gaining 0.08% at 94.26 and a break above 94.50 (2021 high Sep.30) would open the door to 94.74 (monthly high Sep.25 2020) and then 94.76 (200-week SMA). On the flip side, the next down barrier emerges at 93.67 (weekly low Oct.4) followed by 93.51 (20-day SMA) and finally 92.98 (weekly low Sep.23).