United States Dollar Index strengthens above 99.00 as robust US jobs data boosts Fed rate hike bets

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.20 in the early Asian trading hours on Monday. The DXY edges higher amid a ramp-up in US rate hike bets. US markets are closed on Monday for Labour Day. 

Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls (NFP) climbed by 162K in August, versus an upwardly revised rise of 21K prior. This figure came in above the market consensus of 56K. The Unemployment Rate in the US held steady at 4.1% during the same period. 

Traders moved to price in a roughly 58.3% probability that the Federal Reserve (Fed) will hike rates this month following the stronger US jobs data, according to the CME FedWatch tool. 

The US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data will be the highlights later this week. These reports could offer further clues on the Fed's policy path.

"A hot CPI print would all but seal a September hike and underpin a firmer U.S. dollar. A cooler reading would strengthen the case for a hold and leave the U.S. dollar vulnerable to a dovish Fed repricing," said Elias Haddad, global head of markets strategy at BBH.

Dollar firms as strong US payrolls lift yields

According to TD Securities, the latest US labour market data have provided a clear near-term boost to the currency and rates complex, with the bank noting that "a strong payrolls report has pushed US yields and the Dollar higher."

Technical Analysis: US Dollar Index remains capped under the 100-day SMA

In the daily chart, Dollar Index Spot keeps a modest bearish tone as price slips under the Bollinger middle band while holding above the 100-day simple moving average (SMA). The index is now positioned in the lower half of its recent Bollinger envelope, and the Relative Strength Index (14) near 43 hints at waning upside momentum rather than outright oversold conditions, suggesting rallies could be sold while the broader structure remains capped.

On the topside, initial resistance emerges at the Bollinger middle band around 99.35, with a stronger cap at the upper band near 100.10 if buyers attempt a deeper squeeze. On the downside, the 100-day SMA at 99.75 remains a key medium-term support reference, while the Bollinger lower band near 98.60 acts as the next downside objective if sellers extend the current pullback.