Dollar DXY Bounces Off Yearly Highs Amid Tightening Labor Market

The US Dollar Index (DXY) is currently testing resistance at its 2024 swing highs, where it meets this year's uptrend. According to Michael Boutros, Senior Market Analyst at StoneX, weekly momentum on the DXY is at its highest of the year. In a multi-timeframe technical analysis, Boutros notes that daily and four-hour momentum sit deep in overbought territory.

The upcoming US nonfarm payrolls data will be a key event risk for the dollar, with Fed funds futures pricing for the Federal Reserve's remaining decisions shifting after softer PCE inflation data. This shift indicates that traders are re-evaluating their expectations for future interest rate hikes.