US Dollar strengthens following encouraging labor market data, higher US Treasury yields

• DXY Index recovers and flirts with November highs.
• Initial Jobless Claims data came out slightly lower than expected.
• Fed's stance remains hawkish, persistently increasing pressure on US yields.

The US Dollar Index (DXY) rose toward 106.25 on Thursday and appears on track to test the November 1 high near 107.10. What is underpinning this rise is the Federal Reserve's (Fed) hawkish stance, along with a related recovery of US Treasury yields. Low Jobless Claims also benefited the US Dollar.

The US economy remains resilient, showing stubborn inflation and a strong economy. This has made the Fed adopt more hawkish messaging, and markets are delaying the start of the easing cycle.

Daily digest market movers: DXY demonstrates persistent growth coupled with robust inflation

• Fed remains committed to a hawkish stance, given ongoing inflation and robust growth in the US.
• Fed officials on Thursday spoke cautiously, asking for patience in regard to interest rate cuts.
• Market forecasts for the Fed's upcoming meeting showed an important shift and the chances for a rate cut in June have plunged to 20%, while the possibility for a rate cut in July dropped to 50%. Current estimates suggest a likely first cut in September with a 75% probability of a second one in December.
• The US Treasury bond yields show an upward trend for the 2-year, 5-year, and 10-year bonds, currently at 4.98%, 4.68% and 4.64%, respectively.
• On the data front, weekly Jobless Claims came in at 212K, lower than the 215K expected, adding arguments for a strong labor market.

DXY technical analysis: DXY bulls step in and recover ground

The indicators on the daily chart reflect a positive bias for DXY. The Relative Strength Index (RSI) has a positive slope, sitting comfortably in positive territory. This implies an underlying bullish momentum. Complementing this bullish bias is the Moving Average Convergence Divergence (MACD), which shows rising green bars, contributing to the overall buying sentiment.

As for the Simple Moving Averages (SMAs), the DXY pair remains above the 20, 100, and 200-day SMAs, inferring that buying momentum is strong. Adding to this bullish scenario is the ongoing resilience of the bulls, further grounding positive sentiment.