US Dollar takes a breather in its rally ahead of NFP

• The US Dollar is set to close off this week in the green. 
• Tensions in the Middle East together with pared bets of big Fed rate cuts are fueling safe-haven inflows to the Greenback. 
• The US Dollar Index broke the September high at 101.90 but the jobs report data will decide the next move. 

The US Dollar (USD) consolidates on Friday after trading firmly stronger this week, with all eyes on the US Employment Report and specifically on the Nonfarm Payrolls (NFP) numbers. The data will be pivotal as strong figures could move the DXY further away from the tight range it has been moving so far this month. Meanwhile, if numbers turn out weaker than expected, the Greenback could fall back into the range . 

The economic calendar is housing only one main element: the aforementioned US Jobs Report. As always, the Nonfarm Payrolls print will take the most attention. However, elements such as the Average Hourly Wages and the Unemployment Rate could be the second-tier data that in the end will drive the US Dollar higher or lower after the initial volatile reaction. 

Daily digest market movers: All eyes on data and Israel

• Expect some volatile moves in the Greenback if Israel strikes Iranian Oil fields. At the time of writing, discussions between Israel and the Biden administration for a green light on the attacks are still ongoing. 
• At 12:30 GMT, the US Jobs Report for September is due:
  • Nonfarm Payrolls are expected to fall to 140,000, coming from 142,000 in August.
  • Monthly Average Hourly Earnings should ease further, to 0.3% from 0.4%.
  • The Unemployment rate is expected to remain unchanged at 4.2%. 
• At 13:00 GMT, Federal Reserve Bank of New York President John Williams delivers opening remarks at the event "The Future of New York City: Focus on Jobs" organized by the New York Fed.
• Equities are rebounding a touch across the board with Japan having closed off this Friday in the green. European equities post small gains, while US futures are flat. 
• The CME Fedwatch Tool shows a 69.3% chance of a 25 basis-point rate cut at the next Fed meeting on November 7, while 30.7% is pricing in another 50-basis-point rate cut. 
• The US 10-year benchmark rate trades at 3.85%, a 30-day high. 

US Dollar Index Technical Analysis: Hitting Resistance

The US Dollar Index (DXY) has made a stellar recovery this week with the cherry on the cake Thursday, when it was able to break out of September's range. The 55-day Simple Moving Average (SMA) at 102.05 has refused to let the DXY trade higher and shows its strength as a resistance level. Expect the US Jobs Report to be the catalyst that snaps that level for more upside or sees the DXY fall back into range. 

The 55-day Simple Moving Average (SMA) at 102.05 has already acted as resistance and is the first level that needs to be broken for more upside. A leg higher, the chart identifies 103.18 as the very final level for this week. Once above there, a very choppy area emerges with the 100-day SMA at 103.36, the 200-day SMA at 103.75 and the pivotal 103.99-104.00 levels in play. 

On the downside, 100.62 is flipping back from resistance into support in case the DXY closes above it this week. The fresh low of 2024 is at 100.16, so a test of this level should take place before more downside. Further down, and that means giving up the big 100.00 level, the July 14, 2023, low at 99.58 comes into play.

US Dollar Index: Daily Chart