US Dollar Index carries NFP-led gains even as yields ease from 25-month top

• DXY seesaws around three-week low, US NFP triggered corrective pullback from multi-day bottom on Friday.
• US 10-year Treasury yields retreat from two-year high, stock futures remain mildly offered.
• Indecision over March rate hike, softer inflation expectations test Fed hawks.
• Light calendar to begin the week comprising US CPI.

US Dollar Index (DXY) picks up bids to refresh intraday high around 95.50, keeping the latest rebound amid Monday’s Asian session.

The greenback dropped the most since early November 2021 on a weekly basis despite snapping a five-day downturn to bounce off a three-week low the previous day.

Friday’s DXY rebound could well be linked to the positive surprise from the US Bureau of Labor Statistics (BLS), concerning January employment data. That said, The headline Nonfarm Payrolls (NFP) rose by 467K versus the median forecast for a 150K rise and 510K revised prior while the Unemployment Rate rose to 4.0% from 3.9% in December, compared to expectations for a no-change figure. It’s worth noting, however, that the U6 Underemployment Rate extended the south-run to 7.1% from 7.3% previous readouts. Also encouraging was Average Hourly Earnings that jumped strongly to 5.7% versus 4.9%. 

Following the US jobs report, the US 10-year Treasury yields rose to the highest levels in two years before recently easing to 1.90%. The equities, however, remain sluggish after surprising markets with a positive daily close on Friday.

In addition to the BLS data, hawkish comments from Fed policymakers and Russia-linked fears also keep DXY bulls hopeful. Recently, US national security adviser said that the Russian invasion of Ukraine could be any day now.

On the contrary, the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, remain sluggish around 2.41% while fading the bounce off the lowest levels since late September marked the last week.

That said, DXY bulls need a strong inflation figure on Thursday to defend the US dollar buyers.

Technical analysis

A rebound from the 100-DMA, near 95.25 at the latest, joins a steady RSI line to favor the US Dollar Index run-up towards the 50-DMA level near 96.00.