US dollar weekly forecast: US debt, ceiling, and NFP. The US Dollar (DXY) increased by one percentage point last week.

US dollar Key Points

The US dollar has increased over the last three weeks by 3%.

Will the debt ceiling agreement and non-farm payrolls increase its momentum?

DXY verified a break above a significant moving average.

Fundamental Review

This past week saw a 1% increase in the US Dollar (DXY). In reality, the currency has increased by approximately 3% during the last three weeks. The finest 15-day showing from the middle of Sept is being discussed here. Examining the factors that have been propelling this rise will help us determine the likelihood that there is sufficient fundamental momentum for it to go on.

Since markets have factored in reductions in rates from the US central bank in both the near and long-term. The yield on the 2-year Treasury has increased by roughly 14% this month. Rate reductions were aggressively priced following Silicon Valley Bank’s failure, which raised worries about an impending recession.  In the midst of the most abrasive tightening of monetary policy in decades.

Data has typically tended to demonstrate that the job market is still tight since then, especially in recent weeks. The Fed’s favored inflation index, however, shocked last week by moving upward over the board. This indicates that there are persistent pricing pressures that will probably require longer-term adjustment. No indication of the necessity for rate reductions, at the very least.

Remember that fiscal tightening is still taking place in the background as well. The Fed is still selling off its Treasury assets. A further full rate increase of 25 basis points is totally marked towards the month of July. Meanwhile, the year is swiftly coming to an end with the expectation of speedy relief. To cut a long tale brief, this has been exactly has been causing the dollar to strengthen.

The debt ceiling and NFP report is the critical issue

In light of this, there are two crucial events to keep an eye on in the coming days. The initial issue is the continuing discussion about increasing the US debt ceiling on Capitol Hill. The nation runs the risk of defaulting if that fails to occur by the start of June.

The NFP report for May is the second. As was already noted, the Fed is having a difficult time fighting inflation because of the tight job market. More evidence of a healthy employment market will keep reducing betting on a rate decrease in the near future. 190k non-farm jobs are expected to be added to the workforce as the jobless rate rises to 3.5% from 3.4 percent.

The US dollar Technical Perspective

Technical analysis has shown that the DXY has broken away beyond the 100-day (SMA). As a result, there has been a growing technical tilt in favor of the bulls, supporting the fundamental view. The 23.6 percent Fibonacci retracement point at 104.11 is a significant barrier level. If a breakthrough occurs above this level. Its March top at 105.88 will be exposed. If not, a turn below could result in the 100-day SMA acting as resistance.

Pivots- (Weekly)