U.S. Dollar Index is trading down 0.14% at 106.24

The dollar fell on Monday, losing some of the gains it had made from Friday’s U.S. jobs data, as currency markets pulled back on their initial reaction and waited for Wednesday’s inflation data to give more clues about the Federal Reserve’s next steps.

Higher-than-expected U.S. employment figures last week saw the dollar strengthen against major peers because the data was seen by traders as an indication that the Fed could raise interest rates more aggressively to combat inflation.

But this move cooled on Monday, with the dollar index slipping to 106.51 by 1035 GMT, down 0.1% on the day, compared with Friday’s 10-day high of 106.930.

Traders were pricing in a roughly 69% chance of the Fed raising rates by 75 basis points (bps) at its September meeting, according to Refinitiv data.

Fed Governor Michelle Bowman said on Saturday that the U.S. central bank should consider more 75 bps hikes at coming meetings to bring inflation back down.

High inflation combined with Friday’s labour market reading could push the market to fully price in 75 basis points of Fed hikes for September, according to Tim Graf, head of EMEA macro strategy at State Street (NYSE:STT).

As European stock indexes ticked higher, riskier currencies strengthened. The Australian dollar, which is seen as a proxy for risk appetite, recovered following Friday’s losses, up 0.8% on the day at $0.6964.

On technical fronts U.S. Dollar Index RSI stood at 51.80 and currently it is trading above all MA. So, BUY position can be taken with following target and stoploss:

TRADE SIGNAL – : U.S. Dollar Index – BUY: 106.25, TARGET: 106.69, STOP LOSS : 105.95