DXY inter-markets: buy the rumour… buy the fact?

The greenback - in terms of the US Dollar Index - seems to have found strong support around 101.40 on Friday after US Non-farm Payrolls showed the economy added more jobs that initially estimated, and the jobless rate slipped back to 4.7%, in line with previous consensus. However, on the not-so-bright-side, wage inflation stayed somewhat stagnant, as Average Hourly Earnings rose less than forecasted.

Despite the knee jerk to fresh 2-day lows, the buck has managed to regain buying interest and remains on track to close its fifth week with gains.

Expectations of a rate hike by the Federal Reserve at next week’s meeting stay firm, while today’s results should confirm that higher rates on March 15 are a ‘done deal’. According to Reuters’s Fedwatch, the probability of a 25 bp raise next week is above 91%.

Yields in the US money markets have quickly deflated from YTD tops in the wake of the labour market report, but the pullback is expected to be shallow in light – once again – of rising bets on further tightening by the Fed as soon as next week.

In the meantime, DXY is showing support in the mid-101.0s – where coincide recent lows and the retracement of the 2017 drop. Further support align a tad lower at 101.36 (20-day sma) and 101.25 (55-day sma). On the upside, recent peaks in the 102.30 region are still a tough barrier.