US Dollar Forecast: Fed Expectations Shift After NFP Boosts DXY – Bond Yield and GBP/USD Outlook

US Dollar Gains Momentum on Strong Jobs Data

The U.S. Dollar strengthened on Friday as Non-Farm Employment Change exceeded expectations, rising to 256K versus the forecast of 164K. The unemployment rate improved to 4.1%, boosting optimism about the labor market’s resilience. Average Hourly Earnings met forecasts at 0.3%, suggesting steady wage growth.

However, Prelim UoM Consumer Sentiment dipped slightly to 73.2, reflecting lingering concerns.

Inflation expectations increased to 3.3%, raising the stakes for upcoming Federal Reserve decisions. Ahead, traders are watching Monday’s Federal Budget Balance release, forecasted at -$67.6B, for insights into fiscal health. Strong labor data could keep the dollar bullish while influencing Fed policy expectations.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $109.929, up 0.26%, reflecting continued strength within an upward channel. The pivot point at $109.592 is a key level to watch—remaining above it confirms the bullish trend. Immediate resistance is set at $109.988, with the next target at $110.456.

On the downside, support levels are at $109.068 and $108.558. The 50-day EMA at $109.183 and the 200-day EMA at $108.373 further reinforce the bullish bias, as the index continues to trade above these averages.

A break below the pivot point could trigger a sharp reversal, while a sustained move above $109.988 may open the door to fresh highs.

US 10-year Bond Yields

The U.S. 10-year Treasury yield has surged to 4.79%, briefly touching 4.89%, reflecting a continuation of the bullish channel. This rise aligns with robust U.S. economic data, reducing expectations for aggressive rate cuts by the Federal Reserve.

Higher yields attract foreign capital, supporting the U.S. Dollar Index (DXY), which remains strong near 109.93. A higher yield increases the appeal of dollar-denominated assets, boosting the dollar’s value but pressuring gold and other non-yielding assets.

If yields continue rising, further strengthening of the DXY is likely, potentially tightening global liquidity and impacting emerging markets reliant on U.S. funding.

GBP/USD Technical Analysis

The GBP/USD pair is trading at $1.21288, down 0.55% on the day, signaling continued bearish momentum. The pivot point at $1.21929 is a critical level for determining near-term direction. Below this threshold, immediate support is at $1.20376, with stronger support at $1.19397.

On the upside, resistance levels are positioned at $1.23174 and $1.24391, both key for a potential bullish reversal.

The 50-day EMA at $1.23798 and the 200-day EMA at $1.25677 confirm the broader bearish trend as prices remain below both indicators. A sustained break above $1.21929 could shift sentiment toward bullish territory, while failure to reclaim this level may drive further declines.