Dollar Index Breaks Resistance – Expects Further Rise

The US Dollar Index jumped on Friday amid speculative activity. The currency hit a seven-week high against its major currency after data showed employers added more jobs than expected in January, reducing the likelihood that the Federal Reserve will cut interest rates in the near future.

Nonfarm payrolls rose by 353,000 last month, beating economists; expectation of 180,000 wins. Average hourly earnings rose 0.6% after a 0.4% increase in December.

The dollar recently weakened earlier in the week due to a rate cut by the Treasury, although Federal Reserve Chairman Jerome Powell said on Wednesday that a March rate cut is unlikely.

Chairman of the Federal Reserve Jerome Powell announced that the Federal Reserve is prepared to maintain the current base interest rate for an extended period of time if necessary. He noted that the continued progress of inflation was uncertain and hinted at the possibility of a tax cut at some point this year. Powell emphasized the stress of the labor market and at the same time accepted the possible negative effects on the economy of the interest rate. He emphasized (again) that decisions would be made at the meeting, expressed his belief that interest rates were likely to peak, but also indicated that a rate cut in March looked unlikely. That seems highly unlikely at this point given January’s payroll.

In addition, Treasuries benefited from the safe harbor requirement as it once again affected the financial health of US regional banks. But those concerns eased on Friday as shares of US regional banks recovered somewhat after two days of brutal selling, helping lift yields.

Recent changes in dollar and Treasury yields also largely reflect reinvestment after strong January dollar and Treasury rates during the month.

This week, several Fed officials, including Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester, Governor Adriana Kugler, Richmond Fed President Thomas Barkin and Governor Michelle Bowman, reduce volatility. In addition, the currency is affected by Chinese consumer price indices.

Technical Outlook

The dollar index jumped 0.87%, its biggest daily gain this month. The coin rose above 104.04, which was the highest level since 13.12.2023, and settled at 103.9620.

On the chart above, the coin has broken its two-week consolidating resistance. A rising pennant pattern is forming on the chart. Additionally, it also found support at the 20-short-term moving average and formed a bullish candlestick.

All the technical aspects mentioned above are bullish and the coin should soon test the immediate resistance at 104.25. A break at the top opens the door at 104.55-104.75. Alternatively, key support is at 102.80 and a break below that draws to a consolidation at 102.55-102.10.

Also Read : The GBPUSD pair is on verge of Symmetrical triangle resistance , US Non-farm payrolls might cause volatility today.

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