Dollar Rallies Following Payrolls

The US Dollar is the starting the week on a stronger footing through early trading on Monday, despite Friday’s NFP miss. The headline figure printed 142k, below the 164k the market was looking for. Additionally, the prior month’s reading was revised lower to 89k from 112k prior. However, with the unemployment rate seen falling to 4.2% from 4.3% and wage growth rising to 0.4% from 0.2%, the market reaction was mixed. USD was seen dropping initially before rebounding to end the day in the green. Buyers are now picking up momentum with the view that the data was not conclusive enough to drive fresh USD downside.

US Inflation on Watch

Looking ahead this week, focus will now be on US inflation due on Wednesday. With the market still struggling to get a read on whether the Fed will cut by .255 or .5% this month, Wednesday’s CPI data will prove crucial. If annualised August CPI is seen falling to 2.6^ from 2.9% as expected, or deeper, this should bolster expectations of a deeper cut, creating fresh downside pressure in USD. However, if we see any stickiness or a fresh uptick in inflation, this will likely strengthen the argument against a deeper cut, allowing USD room to recover higher near-term as traders cover their short positions.

Technical Views

DXY

For now, DXY remains underpinned by the 100.93 level with price now putting in a higher low, suggesting room for a fresh push higher. 102.46 and the retest of the broken bull trend line will be the first hurdle for bulls. Above there, focus turns to 104.5 next. To the downside, 99.67 will be key support if we break lower.