US dollar strengthens amid sour market mood and rising yields

• The DXY index surged, trading with gains above the 200-day SMA at 103.70.
• Growing tensions between Israel and Hamas made investors seek refuge in the USD.
• Key US economic reports due this week: ISM Services PMI, ADP Employment Change, November Nonfarm Payrolls and the Unemployment Rate.

The US Dollar (USD) edged higher on Monday, with the Dollar Index (DXY) sailing past the 103.70 mark, above the 200-day Simple Moving Average (SMA) and pushing a sour market mood amid rising Treasury yields. 

For the rest of the week, key drivers are on the horizon as investors eye Friday's release of Nonfarm Payrolls for November alongside the Unemployment Rate, while the ISM Services PMI is due on Tuesday and the Automatic Data Processing (ADP) Employment Change report on Wednesday.

Despite mixed signals from the US labour market and cooling inflation in the United States economy, Federal Reserve (Fed) officials indicated a possibility for further policy tightening, signifying a subtly hawkish stance. This week’s key labour market data will influence the modelling of expectations and the Fed's policy trajectory, which could define the short-term trajectory of the US Dollar. 

Daily Market Movers: US Dollar on the rise ahead of labor market data

• The US Dollar is currently trading with gains, with the DXY Index showing a positive upward trend neatly tucked above 103.70.
• The US Dollar's upward trend appears largely driven by a sour market mood and rising bond yields. 
• No significant reports have surfaced during the session that could impact the US Dollar's current trajectory.
• Market participants have their eyes set on key economic reports due this week. On the list are the Nonfarm Payrolls, the Unemployment Rate, ADP Employment Change and the ISM Services PMI updates, scheduled for release on Friday, Wednesday and Tuesday, respectively.
• Overall, all reports are expected to show that the job creation picked up in November, while the ISM Services PMI is seen accelerating regarding its last reading of October.
• US bond yields are edging higher, aligning with the Dollar's uptick. Specifically, the 2, 5 and 10-year yield rates are up, trading at 4.65%, 4.24%, and 4.29%, respectively.
• The CME FedWatch Tool indicates no hikes are priced in for the upcoming December meeting, and markets speculate on rate cuts in mid-2024.

Technical Analysis: US Dollar struggles amid negative territory RSI and subdued SMAs

The indicators on the daily chart are reflecting a predominance of selling momentum. The index position, below the 20 and 100-day Simple Moving Averages (SMAs), indicates that the bears are maintaining control. This control is also noticeable from the Relative Strength Index (RSI), which shows a positive slope but remains in negative territory. This reveals that although buyers are gaining some strength, they are yet to overpower the sellers.

Meanwhile, the Moving Average Convergence Divergence (MACD) signifies decreasing red bars, adding further evidence of shrinking selling momentum. This deceleration is credited to the bears taking a breather after driving the index to its lowest level since last August.
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Support levels: 103.60, 103.30, 103.15, 103.00.
Resistance levels: 104.10 (20-day SMA), 104.40 (100-day SMA), 104.50.