- DXY retreats to the 90.40 region following NFP.
- US 10-year yields dropped to 2-month lows below 1.50%.
- The US economy added 266K jobs in April.
The greenback accelerates the downside and drags the US Dollar Index (DXY) to fresh multi-week lows near the 90.40 level on Friday.
US Dollar Index sold off post-Payrolls
The index retreats for the third session in a row and sees its downtrend accelerated to the area of 3-month lows around 90.40 after US Nonfarm Payrolls greatly disappointed market expectations.
In fact, the US economy created “just” 266K jobs during last month vs. 978K initially estimated. In addition, the Unemployment Rate edged higher to 6.1% (from 6.0%) while Average Hourly Earnings came in above forecasts, expanding 0.7% MoM and 0.3% from a year earlier. Furthermore, the March’s reading was revised lower to 770k (from 916K).
The deep knee-jerk in the buck follows the correction in US 10-year yields to sub-1.50% levels, area last seen in early March.
What to look for around USD
The index met a tough resistance in the 91.40/50 band for the time being and triggered a move lower to the sub-91.00 area amidst the re-emergence of some selling bias in the dollar and optimism in the risk complex. The upbeat note that benefited the dollar in past sessions was sustained by the imminent full re-opening of the US economy, the unabated strength in domestic fundamentals, the solid vaccine rollout and once again the resurgence of the market chatter regarding an anticipated tapering. The latter comes in despite Fed’s efforts to talk down this scenario, at least for the next months.
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families worth nearly $4 trillion. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Could US fiscal stimulus lead to overheating?
US Dollar Index relevant levels
Now, the index is losing 0.55% at 90.38 and faces immediate contention at 90.00 (psychological level) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6). On the upside, a breakout of 91.43 (weekly/monthly high May 5) would open the door to 91.75 (50-day SMA) and finally 91.92 (200-day SMA).
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