US Dollar Index (DXY) reaches 101.80 as recovery gathers pace ahead of US NFP report

• DXY extends Thursday’s rebound from late September lows as US bond yields recover.
• Bond yields and the USD find support as oil-led inflation concerns sustain bets on a Fed rate hike.
• Bulls have reason to remain cautious before the key US NFP release as hopes persist for an end to the Iran war.

Further gains in the US Dollar Index (DXY) during Friday’s Asian session extend its recovery from the previous day’s lowest reading since late September. The index, which measures the Greenback against a basket of currencies, has climbed to around 101.80 over the past hour. Nevertheless, it remains modestly lower for the week, with traders awaiting the closely watched US monthly employment data for fresh direction.

An increase of 65K jobs in October is expected in the widely followed US Nonfarm Payrolls (NFP) report, compared with the previous month’s subdued 29K reading. Forecasts put the Unemployment Rate unchanged at 4.2%. Investors will also scrutinise Average Hourly Earnings: wage growth pressures could significantly shape expectations for Federal Reserve (Fed) policy and influence demand for the US Dollar (USD).

Support for the DXY ahead of the key data release comes from a modest recovery in US bond yields, as crude oil’s sharp overnight rebound revives inflation concerns. Markets continue to assign around a 70% probability to another increase in borrowing costs by the US central bank in December. Yields are consequently recovering from the mid-week decline triggered by the US midterm elections. Geopolitical uncertainty also strengthens the argument for additional gains in the safe-haven USD.

The US may have to destroy the rest of Iran, President Donald Trump said on Thursday, adding that people would know soon enough if he acted. Differences between the US and Iran also persist over Tehran’s nuclear programme and the Strait of Hormuz. However, with top Senate Democrat Chuck Schumer pledging on Wednesday to push for an end to the Iran war, confirmation of a near-term DXY bottom would prudently require strong follow-through buying.

What Does the DXY 1-hour Chart Show?

Which Technical Levels Matter for DXY?

Trading 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 support to underlying demand. The first resistance on the upside lies near 101.84 at the 50.0% retracement. Beyond that, the 61.8% level at 101.99 and the 78.6% retracement at 102.21 precede the recent cycle high zone at 102.49.

Should the index weaken, the reclaimed 38.2% retracement at 101.69 provides 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, before the structural floor at 101.20.

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