The greenback, in terms of the US Dollar Index (DXY), looks to extend Friday’s post-NFP corrective upside in the 95.50 regions following the opening bell in Euroland on Monday.
US Dollar Index looks to risk trends, yields:
Following fresh lows in the 95.15/10 band on Friday, the index managed to regain some upside traction motivated by the solid prints from the January Nonfarm Payrolls (+467K). The corrective move in the buck was also propped up by the strong bounce in US yields across the curve.
The better-than-expected US job creation during last month reinforced the view of a strong labor market and added to the already rising speculation of a probable tighter normalization of the Fed’s monetary conditions.
In the US docket, December Consumer Credit Change will be the sole release later in the NA session in a week that is expected to be dominated by the publication of the inflation figures tracked by the CPI (Thursday).
What to look for around USD:
The dollar regained some poise in the wake of the healthy results from the Nonfarm Payrolls for January. While the constructive outlook for the greenback remains well in place, for the time being, recent hawkish messages from the BoE and the ECB carry the potential to slow the pace of a move higher in the index in the next months. The view of a stronger dollar remains, in the meantime, underpinned by higher yields, persistently elevated inflation, supportive Fedspeak, and the solid pace of the US economic recovery.
Eminent issues on the back boiler: Fed’s rate path this year. US-China trade conflict under the Biden administration. Debt ceiling issue. Escalating geopolitical effervescence vs. Russia and China.
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.
Dollar Index (DXY) Long (Buy)
Enter at: 95.975