US Dollar takes a breather ahead of eventful week

US Dollar takes a breather after last week’s rally.
August jobs report on Friday is anticipated to show a significant increase in Nonfarm Payrolls.
Market expectations for 100 bps of easing from the Fed by year-end remain unchanged.

On Monday, the US Dollar Index (DXY), which measures the US Dollar’s value against a basket of six major currencies, consolidated above 101.50, extending after last week’s gain of more than 1%. Markets await key labor data this week, and the August jobs report, due for release on Friday, is anticipated to show a robust increase in Nonfarm Payrolls (NFP), which might provide support to the US Dollar.

Despite ongoing economic growth that exceeds expectations, the market’s anticipation of aggressive monetary easing appears to have become excessive. However, a cut by the Federal Reserve (Fed) in September is a done deal, but its size will depend on the incoming data.

Daily digest market movers: DXY flat on quiet Monday ahead of key data

Consensus estimates for August’s Nonfarm Payrolls is 165K, with a whisper number of 150K.
Unemployment Rate is expected to fall to 4.2%, while Average Hourly Earnings are expected to rise to 3.7%.
Other data this week, including ISM manufacturing and services PMIs, are expected to decline slightly but remain in expansionary territory.
Moreover, the Fed’s Beige Book report is expected to show that the labor market remains tight.
Dovish bets on the Fed remain steady, and investors are still seeing 100 bps of cuts by year-end.

DXY technical outlook: Index consolidates after last week’s rally, DXY must hold 101.50 line

The DXY Index experienced a consolidation phase after last week’s rally, which resulted in weekly gains of nearly 1%. Currently, the Relative Strength Index (RSI) is below 50, while the Moving Average Convergence Divergence (MACD) is displaying rising green bars, indicating a potential bullish trend. Both indicators point to bullish momentum flattening out but recovering overall.

The key support levels for the DXY are 101.50, 101.30 and 101.00, while the resistance levels are 101.80, 102.00 and 102.30.