US Dollar Index (DXY) Posts Modest Gains Following US Jobs Report

Employment data out of the US was mixed but after a period of volatility, the dollar index managed to stage a small rally. DXY is on pace to close the week with a small gain after a sharp drop last week.

Employment gains for June came in ahead of expectations with 222,000 additional jobs versus the analyst consensus of 179,000. However, the data that the Federal Reserve are paying close attention to fell short. The unemployment rate rose for the first time since January, it ticked up to 4.4% in June from 4.3% in the prior month. Average hourly earnings came in at 0.2%, short of an expected 0.3% and against a downward revised 0.1% in the prior month.

The initial reaction in the currency markets was volatile and took stops from weak hands on both sides in search for liquidity. The dollar index managed to advance to a high of 96.15 prior to losing upside momentum.

DXY posted a strong gain to start out the week but has given back a bulk of the gains after hitting a high mid-week. The rally today has taken the index back above a horizontal level at 95.94 but upward momentum is lacking.

The 95.94 level was prior resistance in May 2016 and had held a spike lower during the US election. The level is seen as a pivotal price point in DXY for a near-term directional bias.

Dollar bulls will want to see the index climb back above resistance at 96.32 to encourage the view that a broader recovery is taking place. The level marks the spike low posted slightly ahead of last month’s Fed meeting.

Support at 95.78 held yesterday’s decline and an initial spike lower following today’s US jobs report. The level is seen as important near-term support.

US Dollar Index (DXY) 4-Hour Chart

DXY 4H July 7

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.