- DXY consolidates weekly gains, picks up bids of late.
- US Congress gets procedural support for $480 billion debt ceiling extension to December, final round matters the least.
- US Treasury yields favor bulls but risk-on mood challenges the upside momentum.
- ADP Employment Change, Jobless Claims hint at firmer NFP underpinning the Fed tapering concerning and stronger USD.
US Dollar Index (DXY) picks up bids to 94.21, filling the day-start gap, during early Friday’s Asian session. In doing so, the greenback gauge keeps the late Thursday’s rebound but remains on the consolidation mood on the weekly basis as risk-on mood battles pre-NFP trading fears.
US Congress got 61 yes, versus 38 no, concerning the debt ceiling extension by $408 billion until early December 2021. Although the final vote is on the way, the Democratic victory in the procedural voting is the key as Biden’s party holds power to get the bill cross the last door.
Elsewhere, a monthly low of the US Weekly Jobless Claims tracks a three-month high ADP Employment Change to keep the Fed hawks hopeful of tapering. Cleveland Federal Reserve Bank President Loretta Mester was the latest one to back the bullish view citing reflation fears.
It should be noted that the improving headlines over the Sino-American relations and the market’s optimism towards the economic recovery from the pandemic also underpin the risk-on mood, challenging the US dollar’s safe-haven demand.
Against this backdrop, the US 10-year Treasury yields gain 1.5 basis points to 1.587% by the press time, after rising to the four-month high the previous day. Further, Wall Street marked another positive day by the end of Thursday and S&P 500 Futures follow suit at the latest.
Moving on, China’s return and the pre-NFP trading lull may challenge the DXY moves but the Fed tapering concerns can keep the buyers hopeful. Forecasts suggest, the headline Nonfarm Payrolls (NFP) to rise by 488K versus 235K prior whereas the Unemployment Rate may ease to 5.1% versus 5.2% previous readouts.
Read: US Nonfarm Payrolls September Preview: How far will markets go when the Fed tapers?
Technical analysis
Although the weekly resistance line questions DXY bulls around 94.45, an ascending support trend line from September 14, near 94.00, limits short-term declines of the US Dollar Index. It should be noted that sustained trading beyond key SMAs and bullish MACD hint at further upside.
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