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US Dollar Strength Underpinned by Higher Treasury Yields, Non-Farm Payrolls Near

US Dollar Strength Underpinned by Higher Treasury Yields, Non-Farm Payrolls Near

Nick Cawley, Senior Strategist


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US Dollar Price, Chart, and Analysis

  • US 10-year bond yields print a fresh four-month high
  • US Jobs Report a make-or-break for further US dollar strength.
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The yield on the benchmark US Treasury 10-year is popping higher, aided by news overnight that the US Senate voted to extend the debt ceiling until December, pushing back market fears of a government default. The Senate agreed by a vote of 50-48 to increase the debt limit by $480 billion to enable the government to pay its bills until early December.

With fears of a US government default now pushed down the road, all eyes will be focused on this month’s US Jobs Report (NFP) released at 13:30 BST today. This month’s report will be watched more keenly than usual as a print in line with expectations, or even mildly below, is likely to trigger the Fed to start tapering its $120 billion a month bond-buying program, a program that has left the central bank holding in excess of USD 8 trillion of assets.

With the central bank likely slowing down and then finishing bond purchases by mid-next year, US bond yields continue to creep higher as one guaranteed buyer exits the market. While the eventual pullback in bond purchases has been known for some time, US Treasury yields may have further to rise as price pressures in the US economy remain at elevated levels.

10-Year US Treasury Yield – October 8, 2021

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The latest US jobs report is released later in the session with expectations that 500k new jobs were created in September, compared to 235k jobs in August. The unemployment rate is seen nudging lower to 5.1% from a prior reading of 5.2%.

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The US dollar basket (DXY) remains within touching distance of highs last seen in September 2020 and continues to cling to a trend resistance line started in mid-June. As always with NFP reports, price action is likely to get volatile post-release, but an inline number should cement tapering from November and continue to boost the value of the greenback. The next level of resistance is an old lower high around 94.79 before 95 comes into view.

US Dollar Daily Price Chart October 8, 2021

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What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.