The US dollar climbed on Friday following a significant increase in non-farm employment data.

The US saw a surge in new jobs added in September, which was revised higher compared to the previous months.

Market hopes for a substantial rate cut in November were dashed due to the employment growth.

The better-than-expected US non-farm employment data propelled the US Dollar Index (DXY) to a fifth consecutive bullish day on Friday. The robust US job growth and the retreat of the US unemployment rate dampened market expectations for the Federal Reserve (Fed) to raise interest rates again in November.

The US unemployment rate fell to 4.1% from the previous 4.2%, further reinforcing the picture of a healthier US labor market than anticipated. Additionally, there were healthy upward revisions to the non-farm data from several months. The NFP total for August increased by 17K, while the July figure rose sharply by 55K, bringing the total to 144K.

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The annual wage growth for September also stabilized, increasing year-over-year by 4.0%, higher than the previous 3.9%. Investors had previously expected the average hourly wage growth for September to slow to 3.8%. Due to comprehensively exceeding expectations in both wages and net new jobs, the rate market's expectations for the pace of rate hikes took a significant hit, rounding off an otherwise average trading week.

According to the FedWatch tool of the Chicago Mercantile Exchange, rate traders' expectations for the Fed's rate call in November plummeted after the NFP; rate futures speculators now consider a small rate cut of 25 basis points by the Fed on November 7th to be 95% likely, with the remaining 5% betting that the federal funds rate will not change at all.

US Dollar Price Forecast

The US Dollar Index (DXY) has recently shown strength, breaking through important levels and surpassing 102.00. It has tested the 50-day Exponential Moving Average (EMA) at 101.90, which could be a significant barrier.The recent price action suggests that there may be a recovery from the early downtrend in the short term. The next significant resistance level is near the 200-day EMA at 103.41. If the index breaks through this level, it could confirm a change in the overall trend.

Since hitting its lowest point in September, the index has been making higher lows, indicating a shift in market sentiment in favor of the US dollar. If this continues, the US Dollar Index may target the 103.50-104.00 range, with the 200-day EMA being a major obstacle.

If it fails to break through the 50-day EMA, the index may consolidate or retreat to around 101.00, with more support at 100.50.

The US Dollar Index appears to be recovering, with the 50-day and 200-day EMAs being significant hurdles. A breakthrough at 103.50 could imply a longer period of growth, while a failure to break through could lead to a retreat to around 101.00.