Investor sentiment towards the Dollar brightened on Friday afternoon following news that the United States added a whopping 312,000 jobs to its economy in the month of December.

The stellar headline jobs number continues to highlight the underlying strength of the US jobs markets, while the 0.4% MoM increase in average earnings acted as icing on the cake. With signs of accelerating wage growth stimulating inflationary pressures and supporting expectations of higher US interest rates, the Dollar roared back to life. Although the unemployment rate rose from a 50 year low of 3.7% to 3.9%, this was due to an increase in the labour participation rate.

Today’s US jobs report certainly provides an argument for the data dependent Fed to raise interest rates. However, concerns over the United States experiencing an economic slowdown still remains on the mind of many investors and this continues to be reflected in the Dollar’s overall price action. While the Dollar Index could appreciate further in the near term as investors relish the blowout jobs report, upside gains may face headwinds down the road.

In regards to the technical picture, the Dollar Index is approaching the 96.50 level as of writing. A solid weekly close above this point is likely to open a path back towards 96.75 and 97.00. If the 96.50 proves to be a stubborn resistance, prices could sink back towards 96.20.


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