The US dollar is gaining as mighty NFP data may delay interest rate cuts

USD continues its momentum, rising over 0.70% on Friday.
Non-farm payrolls data in the US in May exceeded market expectations, indicating a mighty recovery in the labor market.
Due to the abundance of positive economic signals, the chances of a Fed rate cut are decreasing in September.

On Friday, the US dollar index (DXY) extended its good streak after stronger-than-expected labor market data. Nonfarm Payrolls data combined with rising wage inflation paint the picture of a solid and resilient economy, which could justify a delay in interest rate cuts by the Federal Reserve (Fed).

Attention now turns to future Fed meetings as the market awaits any change in monetary policy stance following positive labor market data. The chances of cuts in June and July remain low after good employment data, falling to around 50% in September.

Daily Market Change Summary: DXY Strengthens, Backed by Solid Economic Performance

Data on employment in the non-agricultural sector for May increased by 272,000, exceeding market forecasts of 185,000. and showing a significant escalate compared to April’s revised figure of 165,000.
The unemployment rate rose slightly to 4% from 3.9%.
Wage inflation data, as indicated by the percentage change in average hourly earnings, rose to an annualized 4.1%, rebounding from a revised 4% in April.
Meanwhile, Treasury bond yields followed an upward trend, with 2-, 5-, and 10-year rates rising over 2% to 4.85%, 4.44%, and 4.41%, respectively.

DXY Technical Analysis: As the index recovers key levels, a bullish reversal occurs

The DXY Index’s reversal is becoming more apparent as it moves beyond the key 20, 100- and 200-day moving averages (SMAs). The relative strength index (RSI) has moved back above 50, signaling a return to bullish momentum, while the moving average divergence (MACD) continues to display lower red bars, suggesting that buying interest is growing.

To maintain an positive outlook, DXY bulls need to hold the critical resistance level at 104.40, reclaimed after mighty labor market data.