The US dollar rises for a fifth straight day after the NFP jobs report

• The US Dollar rose after a blistering NFP print on Friday.
• US job growth picked up in September, with positive revisions from previous months.
• Market hopes for a further rate cut in November were dashed by the job gain.

The US dollar (USD) index (DXY) rose for a fifth consecutive upbeat day on Friday, driven by better-than-expected US payrolls. A firm showing that U.S. job gains and a reduction in the U.S. unemployment rate thwarted market expectations for a repeat double-tapering from the Federal Reserve (Fed) in November.

The U.S. unemployment rate fell back to 4.1 percent from 4.2 percent previously, further cementing a healthier-than-expected landscape in the U.S. labor market. Additionally, NFP releases for the past few months have seen healthy positive revisions. August’s previous NFP total was boosted by another 17,000, while July’s figure rose sharply by 55,000, bringing the total to 144,000.

Annual wage growth also picked up in September, rising 4.0% from 3.9% previously. Investors had expected September average hourly earnings growth to fall to 3.8 percent. With wages and net job additions beating expectations across the board, the rate market’s expectations of a higher pace of rate cuts had a huge impact to round out an average-to-best trading week.

According to CME’s FedWatch tool, rate traders’ expectations for the Fed’s November rate call fell after NFP; rate futures speculators now see a 95% chance the Fed will cut rates by a modest 25 bps on November 7, with the final 5% betting on no move in the Fed funds rate.

US dollar price forecast

The Dollar Index (DXY) has been strong lately, breaking through important levels and breaking above 102.00. It tested the 50-day EMA at 101.90, which could be a significant barrier.

Recent price action suggests a possible near-term recovery from the previous downtrend. The next important resistance is the 200-day EMA at around 103.41. If the index breaks this level, it could confirm a change in the overall trend.

Since hitting its lowest point in September, the index has made higher lows, showing a shift in market sentiment in favor of the dollar. If this continues, DXY could target the 103.50-104.00 range, where the 200-day EMA is a major obstacle.

If it does not break above the 50-day EMA, the index may consolidate or return to around 101.00, with more support at 100.50.

The dollar index appears to be recovering, with the 50- and 200-day EMAs as important barriers. Break above 103.50 could mean a longer bullish period, while failure to do so could lead to a dip around 101.00.

DXY Daily Chart