US Dollar Index begins NFP-week on a front foot above 97.00 on Russia-Ukraine fears

• DXY kick-starts the key week with an upside gap of nearly 50 pips.
• Russia, Belarus trigger nuclear-war fears, EU wants Ukraine to join the bloc.
• Kyiv-Moscow talks near Belarus border will be crucial.
• NFP will be important as rate-hike probabilities ease.

Broad risk-aversion wave helped the US Dollar Index (DXY) to print a strong start to the key week, with an upside gap of nearly 50 pips to 97.15 during Monday’s Asian session.

The DXY rose to the eight-month high in the last week as sour sentiment pushed traders towards the traditional risk-safety. The same helped the greenback gauge to print a three-week uptrend by the end of Friday, up 0.62% intraday by the press time.

Having witnessed the Russian invasion of Ukraine, the weekend headlines were rather mixed as the West levied harsh sanctions on Moscow but President Vladimir didn’t step back as put nuclear arsenal on high alert, raising fears of a nuclear war. On the same line are the latest headlines from Belarus that the nation wants to renounce its non-nuclear neutral status.

Additionally weighing on the risk appetite are the latest comments from European Commission President Ursula von der Leyen seemed to have challenged the market’s cautious optimism. The regional leader recently said to the EU News that the European Union (EU) wants Ukraine in the bloc while also adding, “They’re one of us.”

The risk-off mood, however, has recently been challenged by the headlines conveying the Moscow-Kyiv talks at the Belarus border.

Against this backdrop, the US 10-year Treasury yields print six basis points (bps) of a daily downside to 1.92% whereas S&P 500 Futures pare intraday losses, down 1.75% on a day.

Read: Equities forge ahead on Friday despite Ukraine, while Treasuries and the dollar return to status quo

While geopolitical headlines are likely to become the key catalyst for markets, monthly prints of the US jobs report for February will be crucial as well. The reason could be linked to the recently mixed comments from the Fed policymakers as well as a retreat in the hopes of a 0.50% rate hike in March. That said, the CME’s FedWatch Tool marks only 5% probabilities of a rate-lift in March at the latest.

Read: The week ahead: US non-farm payrolls, Bank of Canada, ITV, Darktrace, Aviva results

Technical analysis

Unless staying beyond the late 2021 tops surrounding 96.90, the US Dollar Index remains on the way to challenge January’s peak around 97.45. However, overbought RSI may test the DXY bulls around the latest high of 97.73.