The US Dollar Index has strengthened to approximately 102.20 on Monday. The US economy generated 29,000 jobs in September, while the Unemployment Rate increased to 4.2%. Weaker-than-anticipated employment figures in the United States have led to a moderation in expectations regarding potential rate increases by the Federal Reserve. The US Dollar Index, an index of the value of the US Dollar measured against a basket of six world currencies, currently trades near 102.20 in the early Asian trading hours on Monday. The DXY maintains a favourable position in the context of safe-haven flows. Traders are poised for the release of the US ISM Services Purchasing Managers Index report on Monday, seeking new momentum. The increase in US Treasury yields, coupled with the persistent conflicts in the Middle East and fiscal concerns in France, enhances safe-haven flows, thereby bolstering the US Dollar against its competitors. “The dollar is the main winner in the current environment as not only is the rise in Treasury yields boosting the appeal of US assets, but the broad selloff in debt globally is fuelling safe-haven flows into the greenback,” said Matthew Ryan.
Nonfarm Payrolls in the United States increased by 29K in September, compared to the 133K increase observed in August, as reported by the US Bureau of Labour Statistics on Friday. This figure came in below the market consensus of 90K. The Unemployment Rate increased to 4.2% in September, up from 4.1% in August. Traders assessed the diminishing likelihood of a Federal Reserve rate increase this month following disappointing US employment figures. Markets are currently assigning approximately an 82.3% probability that the US central bank will maintain its interest rates in October, a significant increase from the 35.8% likelihood observed just a week prior, as indicated by the CME FedWatch tool. They continue to anticipate an increase in December, followed by two additional hikes in the first half of 2027. According to TD Securities, the US services sector is likely to show signs of cooling in the latest ISM release, with the bank expecting that “the services index likely reversed its unexpected August gain, falling to a below-consensus 54.0 in September.” Analysts at the bank highlight that “recently strengthening new orders and activity components” are now expected “to lead the reversal,” even as “employment likely improved for a second consecutive report – though it is expected to stay in contraction.” TD Securities also cautions that “prices paid will also garner attention after rising in Jul-Aug,” keeping cost pressures in focus for the services sector.
Fed’s Logan conveys a distinctly more hawkish stance, as evidenced by the 9.2/10 FXS Speechtracker score, which significantly exceeds the historical average of 8.1/10, indicating a pronounced tightening bias compared to the established baseline. The emphasis that higher yields may reflect increased term premiums, potentially reducing the need for further tightening, is overshadowed by explicit calls for at least 50 bps more in rate hikes and several additional moves to revive price stability, reinforcing the view that current policy is not yet restrictive enough. The interplay between a robust economic expansion and a well-calibrated labour market supports the assertion that absent an increase in interest rates, inflation is unlikely to revert to the Federal Reserve’s 2% target. This perspective is generally favourable for the Dollar while posing challenges for risk-sensitive assets. The FXS Fed Sentiment Index has increased by 1.68 points to 136.59, indicating a definitive shift further into hawkish territory and corresponding with the heightened FXS Speechtracker reading. With the index significantly exceeding the neutral 100 mark, markets are expected to incorporate a prolonged higher rate trajectory, which is likely to support the Dollar while exerting pressure on the Euro, Yen, and other lower-yielding currencies.
In the daily chart, the near-term bias of the Dollar Index Spot remains bullish as the price sustains its position above the 100-day simple moving average and the Bollinger middle band, thereby reinforcing a constructive underlying trend. However, the Relative Strength Index (14) at 76.34 indicates overbought conditions, implying that upside momentum is extended and the index may be susceptible to a corrective pause rather than a new impulsive move upward. On the topside, immediate resistance is situated at the Bollinger upper band near 102.60, where buyers may begin to temper their exposure should overbought pressures escalate. On the downside, initial support emerges at the Bollinger middle band around 100.50, followed by the 100-day SMA at 100.15 as a deeper trend floor; a more pronounced setback would likely target the lower Bollinger band near 98.40, where broader demand should reassert if the bullish structure is to remain intact.
