US Dollar Index (DXY) recovers further to 101.80 as US NFP report approaches

• Rebounding US bond yields help DXY extend Thursday’s recovery from its lowest levels since late September.
• Bond yields and the USD find support as oil-related inflation concerns sustain expectations of a Fed rate rise.
• Ahead of the key US NFP release, hopes of an end to the Iran war call for caution among bulls.

At around 101.80 in the past hour, the US Dollar Index (DXY) is extending its recovery during Friday’s Asian session from the low reached the previous day, its weakest level since late September. The index, which measures the Greenback against a basket of currencies, nevertheless remains modestly lower over the week as traders await fresh direction from the key monthly US employment figures.

October’s US Nonfarm Payrolls (NFP) report is expected to show 65K new jobs, compared with the previous month’s weaker increase of 29K, while the Unemployment Rate is projected to remain at 4.2%. Investors will also scrutinise Average Hourly Earnings: pressure from wage growth could have a significant bearing on expectations for Federal Reserve (Fed) policy and demand for the US Dollar (USD).

Ahead of this important data release, inflation concerns have resurfaced following a sharp overnight rebound in crude oil prices. Markets also continue to price in around a 70% probability of another increase in US borrowing costs in December. Together, these factors have prompted a modest recovery in US bond yields after the mid-week decline triggered by the US midterm elections, lending support to the DXY. Geopolitical uncertainty provides a further argument for gains in the safe-haven USD.

On Thursday, President Donald Trump said the US may have to destroy the rest of Iran, adding that people would know soon enough if he acted. Differences between the US and Iran over Tehran’s nuclear programme and the Strait of Hormuz also persist. Against that backdrop, however, top Senate Democrat Chuck Schumer pledged on Wednesday to press for an end to the Iran war. It therefore remains prudent to await sustained, strong follow-through buying before concluding that the DXY has established a near-term bottom.

DXY recovery on the 1-hour chart

DXY Holds a Mildly Bullish Bias

Holding above the 100-hour Exponential Moving Average (EMA) at 101.62 leaves the DXY with a mildly bullish bias. A move back above the 38.2% Fibonacci retracement at 101.69 adds to underlying buying support. The first resistance on a further advance lies near 101.84, the 50.0% retracement. Beyond that sit the 61.8% level at 101.99 and the 78.6% retracement at 102.21, followed by the recent cycle high area at 102.49.

Should the index retreat, the recaptured 38.2% retracement at 101.69 offers the first support, followed by the 100-period EMA at 101.62. Further down, support lies at the 23.6% Fibonacci level of 101.50 and the structural floor at 101.20.

(The technical analysis of this story was written with the help of an AI tool. Know more.)