DXY inter-markets: further upside likely

The US Dollar Index (DXY), which tracks the buck vs. its main rivals, is prolonging its upside since Monday, clinching fresh 3-month peaks in levels just above the 97.00 handle and opening the door for further upside as it remains well underpinned by sentiment and dwindling momentum in the risk-associated universe.

Auspicious results in the US docket have boosted further expectations of a Fed’s rate hike by year-end. According to CME Group’s FedWatch tool and based on Fed Fund future prices, the probability of higher rates in December is just above 55% and over 14% for the next month.

Yields in US money markets are trading on a firm fashion, reflecting the upbeat momentum around USD ahead of today’s key release of Non-farm Payrolls, with market consensus seeing the economy adding more than 170K jobs during last month.

Against the current strong backdrop in the dollar, a positive surprise/’in line’ results today at NFP could give extra oxygen to USD, propelling the index to the next significant hurdle in the 97.60 region, July’s tops. If cleared, the next limestone should appear around the peak seen in March around 98.60 ahead of the psychological 100.00 mark and then the ‘triple tops’ above 100.00 recorded in March/April/November 2015.