The dollar flickered back to life on Friday afternoon, with prices sprinting toward 89.20 as investors cheered January’s solid U.S. jobs data.
The U.S. economy created 200,000 new jobs in January, while the unemployment rate remained steady at 4.1%. Yearly wage growth dished out an upside surprise by rising 2.9% (an eight-and-a-half-year high), throwing the dollar a much-needed lifeline. Repeated signs that wage growth is building momentum are likely to support rising inflation expectations, which could boost speculation of higher U.S. interest rates this year. The dollar clearly needed support this week, and January’s impressive U.S. jobs data has come to the rescue.
From a technical standpoint, the Dollar Index is still pressured on the daily charts. Prices remain at risk of depreciating back below 89.00, if bulls are unable to break above the 89.60 level. Sustained weakness below 89.00 may invite decline back towards 88.50. Alternatively, breakout above 89.60 could pave the way toward 90.00.