The U.S. Dollar index (DXY) gained another high at 93.2 points, a maximum not seen since November 2020. The rally of the Greenback may have several reasons to continue, but it may be suspended after the release of the NonFarm Payrolls report this Friday.
Firstly, accelerating vaccination in the United States and expectations about a new $3 trillion stimulus bill promised by Joe Biden may support the optimism over rising business activity in the country, as well as inflation expectations, which may push up Treasuries yields. The 10-year Treasuries yield jumped to 14-month highs at 1.77% while it was at 1.4% at the beginning of March 2021. March Consumer confidence index jumped from 90.4 points in February to 109.7 points, surpassing expectations of 96.9 points. The index outstanding readings confirmed investors’ positive sentiment.
Secondly, the U.S. Dollar seems to be regaining its safe haven asset role amid new extended lockdowns in Europe. Moreover, it is seen to have an advantage not only over European currencies like the British Pound, Euro or Swiss Franc, but also over more traditionally risky currencies like the Lonnie, Aussie and Kiwi.
If the DXY index remains above 93.2 points and managers to hold this level as a support, it could mean a breakthrough of an important level with a possible rally to 94.0-94.3 points.
The NonFarm Payrolls report this Friday could be a major milestone for the Dollar. The Greenback may hardly perform a significant volatility ahead of this important labour data, and may even step back to 92.5-93.0 points.
However, in case of positive NonFarm Payrolls figures, the upside movement of the Dollar may be inevitable. Although, expectations concerning the labour market in the United States are quite high – NonFarm Payrolls are expected to be up by 650,000 in March after just 379,000 in February; the unemployment level is forecast to 1decline to 6% from 6.2% a month before. If such elevated expectations are not met, investors may be disappointed and this may cause them to sell the Dollar, which may drive the DXY index to the 92.4 points support level.
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