101.80: US Dollar Index (DXY) continues rebound ahead of US NFP report

• Recovering US bond yields help DXY extend Thursday’s rebound from its lowest levels since late September.
• Bond yields and the USD draw support as oil-related inflation concerns sustain bets on a Fed rate increase.
• With the key US NFP release approaching, hopes of ending the Iran war call for caution among bulls.

The US Dollar Index (DXY) reached the 101.80 area in the past hour. Friday’s Asian session has brought further gains for the index, which measures the Greenback against a basket of currencies, extending its recovery from the lowest level since late September recorded on Thursday. Modest losses for the week remain, however, as traders await fresh direction from the crucial monthly US employment figures.

October job creation is expected to total 65K in the closely watched US Nonfarm Payrolls (NFP) report, compared with the previous month’s weaker 29K reading. Forecasts put the Unemployment Rate unchanged at 4.2%. Average Hourly Earnings will also attract scrutiny: wage pressures could significantly shape expectations for Federal Reserve (Fed) policy and influence demand for the US Dollar (USD).

Ahead of the major data release, crude oil’s sharp overnight rebound has revived inflation concerns. Markets also continue to assign around a 70% probability to another increase in US borrowing costs in December. These expectations have prompted a modest recovery in US bond yields after the mid-week slide triggered by the US midterm elections, lending support to DXY. Geopolitical uncertainty provides another argument for further appreciation in the safe-haven USD.

On Thursday, President Donald Trump warned that the US might have to destroy the rest of Iran, adding that people would know soon enough if he took action. Differences between the US and Iran also persist over Tehran’s nuclear programme and the Strait of Hormuz. Yet top Senate Democrat Chuck Schumer pledged on Wednesday to press for an end to the Iran war. That prospect argues for waiting for sustained, strong follow-through buying before concluding that DXY has formed a near-term bottom.

1-hour DXY chart

101.62 underpins the technical outlook

Holding above the 100-hour Exponential Moving Average (EMA) at 101.62 leaves DXY with a modest bullish bias. Its recovery above the 38.2% Fibonacci retracement at 101.69 adds support to underlying demand. The first upside hurdle is the 50.0% retracement around 101.84. Beyond that lie the 61.8% level at 101.99 and the 78.6% retracement at 102.21, with the recent cycle high around 102.49 further above.

A pullback would first encounter support at the recaptured 38.2% retracement of 101.69, followed by the 100-period EMA at 101.62. Lower down, the 23.6% Fibonacci level at 101.50 provides further support before the structural base at 101.20.

(The technical analysis of this story was written with the help of an AI tool. Know more.)