US Dollar Index extends post NFP run-up to two-week top near 93.00

• DXY prints mild gains even as bulls take a breather around multi-day top.
• US NFP crossed estimates and prior readings, Unemployment Rate also dropped in July.
• US policymakers jostle over stimulus, budget with the slower progress of late.
• Risk catalysts remain the key amid a light calendar.

US Dollar Index (DXY) prints 0.12% intraday gains despite stepping back from the recently flashed two-week top of 92.92 to 92.90 amid Monday’s Asian session. In doing so, the greenback gauge keeps Friday’s NFP-led gains amid optimism concerning the US stimulus. Also favoring the USD could be the covid woes and geopolitical headlines from the UK, North Korea and relating to Taliban.

The DXY rose the most in 18 days on Friday after the US Bureau of Labor Statistics renewed the market’s optimism towards the world’s largest economy with July month’s figures. As per the latest data, the headline Nonfarm Payrolls (NFP) jumped 943K versus 938K prior (revised from 850K), also crossing the market expectations of 870K. Further, the Unemployment Rate declined to 5.4% from 5.9% in June and the Labor Force Participation Rate improved modestly to 61.7%.

Following that, the weekend updates suggesting that the US policymakers inch closer to the much-awaited stimulus in the Senate also favored the DXY bulls.

Additionally, the Taliban’s firming up control in Northern Afghanistan and North Korea’s refrain from stepping back on the nuclear testing join the UK’s political jitters to weigh on the market sentiment, putting a safe-haven bid under the US Dollar Index.

The risk-off mood can be witnessed in a 0.30% intraday fall of the S&P 500 Futures, as well as 1.7 basis points (bps) of an upside in the US 10-year Treasury yields, by the press time.

Considering a light calendar, the DXY is likely to take clues from the risk catalysts for immediate directions. Among them, the ongoing voting on the US stimulus package will be the key to follow whereas China’s inflation data, covid numbers and geopolitical news may offer extra directives to watch.

Technical analysis

A clear break of a downward sloping trend line from November 2020, around 92.70, propels DXY bulls toward the previous month’s high near 93.20. However, any further upside will be challenged by the yearly top surrounding 93.50.