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  • DXY loses some upside momentum near 91.60.
  • Lack of traction in US yields weighs on the dollar.
  • Nonfarm Payrolls will take centre stage later in the NA session.

The greenback, in terms of the US Dollar Index (DXY), faces some selling pressure soon after hitting new yearly peaks around 91.60.

US Dollar Index now looks to the labour market

The index keeps navigating in levels last seen in early December 2020 well above the 91.00 barrier, although the lack of progress in the recovery of US yields – particularly the 10-year benchmark – appears to be weighing on the buck on Friday.

Recent upbeat results in the US docket sustained further the view that the US economy is outperforming its G10 peers. This view is also reinforced by the vaccine rollout in the US, which has reached around 10% of the population vs. a meagre 3% in the Old Continent, all morphing into extra legs to the rally in the dollar.

Later in the NA session, the January’s Nonfarm Payrolls will take centre stage along with the Unemployment Rate. Market consensus expects the economy to have added 50K jobs during last month and the jobless rate to have stayed put at 6.7%.

What to look for around USD

The dollar’s upside remains well and sound and pushed DXY to new YTD highs around 91.60 earlier on Friday, always on the back of the renewed offered bias in the risk-associated universe and higher yields in the US bond market. The continuation of the uptrend in the dollar, however, is forecast to remain somewhat contained amidst the fragile outlook for the currency in the medium/longer-term, and always against the backdrop of the current massive monetary/fiscal stimulus in the US economy, the “lower for longer” stance from the Fed and prospects of a strong recovery in the global economy.

US Dollar Index relevant levels

At the moment, the index is losing 0.20% at 91.35 and faces initial support at 90.63 (55-day SMA) followed by 89.20 (2021 low Jan.6) and finally 88.94 (monthly low March 2018). On the other hand, a breakout of 91.60 (2021 high Feb.5) would open the door to 91.84 (100-day SMA) and finally 92.46 (23.6% Fibo of the 2020-2021 drop).