US Dollar consolidates below 94, looks to close fourth week in a row higher

After leaping to its highest level since July 27 at 94.09, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, retraced its gains and turned negative below the 94 handle in the late NA session. As of writing, the index was at 93.66, losing 0.12% on the day.

Earlier in the day, the Labor Department announced that the total nonfarm employment in the U.S. decreased for the first time since 2010 amid the negative impact of hurricanes Harvey and Irma on small businesses. Following an increase of 169K in August, NFP came in at -33K in September. Nonetheless, the greenback rallied as further details of the report showed that the unemployment rate dipped to its lowest level in more than 16 years at 4.2% while the annual wage growth came in at 2.9%. 

• US: Total nonfarm payroll employment decreased by 33,000 in September

Commenting on the data, “investors will find solace in a whole host of other labor market indicators that reveal an underlying labor market that continues to show evidence of resilience and continued tightening,” Scott Anderson, chief U.S. economist at Bank of the West in San Francisco, told Reuters.

However, the DXY struggled to extend its upside any further as resurfacing geopolitical tension between the United States and North Korea forced investors to take some profit off the table ahead of the weekend. 

Despite this late retreat, the index is looking to close the fourth week in a row with gains as investors continue to price a December Fed rate hike since the last FOMC meeting. In fact, the probability of a 25 bps rate hike in December is now slightly over 90% according to the CME Group FedWatch Tool.

• US NFP: Despite the negative headline, Fed still has the green light for December - Wells Fargo
• Fed's Bostic: Still expecting one more interest rate hike by year's end

Technical outlook

The initial resistance for the index could be seen at 94.40 (100-DMA), ahead of 95 (psychological level) and 95.75 (Jul. 12 high). On the downside, supports align at 93.25 (Oct. 5 low), 92.70 (50-DMA) and 92 (psychological level).