Author: Mr. Amar – Technical Analyst

Last week of January 2022 shines for US dollar as it soared higher due to hawkish Federal Reserve monetary policy announcement. Chair Jerome Powell opened the door to raising rates and ending quantitative easing in March. He was also not shy about leaving the door open to hiking at every rate decision this year if conditions warrant. The DXY Index rose a little 0.04%. The index, which measures the dollar’s value against other major currencies, rose about 1.7% for the week to mark its biggest weekly gains since June. It shot above 97 for the first time since July 2020.

The greenback punched through some key technical levels, and after the false breaks earlier this month in the yen and euro, some short-term players and momentum traders may be trying to pick a top.  However, for medium-term participants, analysts expect the US dollar to rise further. According to Labor Department, US labor costs increased strongly for this fourth quarter and The Employment Cost Index (ECI), the broadest measure of labor costs, rose 1.0% after increasing 1.3% in the prior quarter.

This week focus will be on the non-farm payrolls report. The nation is expected to add about 180k positions in January, down from roughly 200k in December. More focus may be given on average hourly earnings. Looking at the next chart below, it could be argued that the labor market is tight. However, it should be noted that the RBA, ECB and BoE rate decisions are on tap ahead. If these central banks also offer increasingly hawkish shifts, they could boost the Australian Dollar, Euro and British Pound respectively.