. US Dollar Index Reacts: March NFP Exceeds Expectations

US Dollar Index Reacts: March NFP Exceeds Expectations

US Dollar Index Reacts: March NFP Exceeds Expectations

06 Apr 2024

Despite robust Non-Farm Payrolls (NFP), the US Dollar concludes the week with losses.

  • The DXY Index surged to 104.60 before settling at 104.30.
  •  The Bureau of Labor Statistics (BLS) released March’s Non-Farm Payrolls (NFP) data, surpassing expectations.
  • US Treasury yields surged following the labor data’s publication.

The US Dollar Index (DXY) has retreated to 104.30 after an initial sharp rise on Friday, propelled by an unexpected positive outcome in the Nonfarm Payrolls (NFP) report. The robust labor market performance, highlighted by March’s NFP report exceeding expectations, reinforces the Dollar’s optimistic trajectory. Nevertheless, the likelihood of a June rate cut by the Federal Reserve (Fed) remains considerable and consistent.

The timing of the Fed’s easing cycle will remain influenced by US economic data, with expectations leaning towards a June start. In the upcoming week, market attention will be on March’s Consumer Price Index (CPI) readings.

The DXY surges as labor market data surpasses forecasts.

The US Bureau of Labor Statistics (BLS) reported a rise of 303K jobs in March, significantly exceeding the anticipated 200K.

The previous Nonfarm Payrolls (NFP) growth figure for February, initially reported at 275K, was revised downwards to 200K.

The Unemployment Rate experienced a slight decrease from 3.9% to 3.8%.

The yearly rate of wage inflation, as indicated by Average Hourly Earnings, was revised downwards to 4.1%, in line with predictions.

Nevertheless, the market expects a June rate reduction with approximately a 70% probability, along with an estimated cumulative easing of around 75 basis points throughout the year.

US Treasury yields are increasing, with the 2-year yield standing at 4.70%, the 5-year yield at 4.35%, and the 10-year yield at 4.36%.

DXY technical analysis: In the short-term perspective, DXY demonstrates dominant bullish momentum.

According to the indicators on the daily chart, DXY shows a positive bias with a favorable orientation on the Relative Strength Index (RSI). Presently, the RSI displays an upward trend in positive territory, indicating the prevailing bullish momentum over selling pressure in the near term. Meanwhile, although the Moving Average Convergence Divergence (MACD) shows flat green bars, it still suggests positive prospects for a bullish trend.

Moreover, the index’s alignment with its Simple Moving Averages (SMAs) lends additional support to this claim. DXY’s position above the 20, 100, and 200-day SMAs indicates the dominance of bullish sentiment. Buyers have grounds for optimism as long as the index maintains its position above these levels.