Breaking: US Dollar Index jumps to fresh two-decade high near 110.00

US Dollar Index (DXY) marked a leap to poke the 110.00 threshold, also refreshing the 20-year high, to begin the week’s trading amid fears surrounding the energy crisis in the European Union (EU), as well as the escalating Sino-US tussles. Also fueling the DXY prices could be the hawkish Fed bets.

However, an off in the US markets due to the Labor Day holiday and mixed jobs report appeared to have challenged the DXY bulls as the quote retreats to 109.70 following the gap-up opening.

That said, the Group of Seven (G7) nations agreed on capping the price of Russian oil in the international markets. Following that, Moscow halted energy supplies to the European Union (EU) through Nord Stream 1 pipeline, citing a ‘leak’, during the weekend. It’s worth noting, however, that Politico ran a story mentioning that Russia’s Gazprom said on Saturday it would increase its shipments of gas to Europe via Ukraine, citing media reports. In addition to the Russia-linked energy problems and a likely recession due to the same, a halt in the US-Iran nuclear talks also amplifies oil woes for the old continent. “Iran nuclear talks stall again after latest response from Tehran,” said Bloomberg.

On a different page, US President Joe Biden’s administration poured cold water on the face of expectations that the US may ease/remove the Trump-era tariffs on China. “The Biden administration will allow Trump-era tariffs on hundreds of billions of dollars of Chinese merchandise imports to continue while it reviews the need for the duties,” said Bloomberg.

Talking about the data, US employment data marked mixed readings as the headline Nonfarm Payrolls (NFP) rose past 300K forecast to 315K, versus 526K prior, but the Unemployment Rate rose to 3.7% compared to 3.5% expected and prior. Further details reveal that the Average Hourly Earnings reprinted 5.2% growth for August, a bit lesser than the 5.3% market consensus. Also, Factory Orders dropped to -1.0% for July compared to 0.2% forecasts and 1.8% in previous readings.

After the data release, the US Treasury yields retreated from the multi-day high and exerted downside pressure on the DXY. However, the fears of recession and firmer wage growth appeared to keep the greenback bulls hopeful.

Moving on, the US holiday may restrict the market’s moves but the challenges to risk appetite and hawkish bets on the 0.75% Fed rate hike in September, could keep the DXY on the front foot.

Technical analysis

Unless breaking a three-week-old support line, near 109.10 by the press time, DXY remains on the bull’s radar.