S&P 500 rallies on soft wages; USD faces CPI risk ahead

The S&P 500 continues its upward trajectory, indirectly weakening the US dollar as risk appetite improves following Thursday's NFP report. While the employment data appeared hawkish on the surface, lower wage growth has eased inflation concerns, reducing expectations for aggressive Fed tightening. The dollar index has retreated 0.2% as equity markets rally, with USD pairs showing mixed performance. Traders are now focused on the upcoming CPI release, which could trigger significant dollar volatility if inflation runs hot. A higher-than-expected CPI reading could spark hawkish repricing in rate expectations, potentially reversing recent dollar weakness. Technical analysis suggests the dollar index faces resistance at 105.50, while support lies at 104.80. The correlation between equity strength and dollar weakness remains intact, suggesting continued USD pressure if stocks maintain their bullish momentum.