US Dollar Index bulls prod 102.85 as NFP week begins with risk-off mood, focus on US PMI

US Dollar Index (DXY) kick-starts the NFP week on a firmer footing, after a three-week losing streak, as it marches to 102.83 during the early hours of Monday’s Asian trading session. In doing so, the greenback’s gauge versus the six major currencies cheers the market’s risk aversion, as well as cautious mood ahead of the key US activity data and jobs report for March.

DXY dropped in the last three consecutive weeks amid receding fears of witnessing a bank crisis and the downbeat US data. Also weighing on the US Dollar Index could be the Federal Reserve (Fed) policymakers’ inability to convince markets of their hawkish capacity. However, the weekend news of the oil supply cut from the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, renew inflation fears and propel the concerns of higher rates, which in turn underpinned the US Dollar’s haven demand.

Talking about the key data, Friday’s US Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, declined to 4.6% YoY in February from 4.7% expected and prior. On a monthly basis, Core PCE inflation rose 0.3% while easing below the market expectation of 0.4% and a downwardly revised 0.5% previous reading. It should be noted that the final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP), also known as the Real GDP, marked an easy Annualized growth number of 2.6% versus 2.7% previous forecasts.

Even so, Fed Chairman Jerome Powell pushed for one more rate hike while Federal Reserve Bank of Boston President Susan Collins highlighted the importance of higher rates to tame inflation during her latest speeches. On the same line, Federal Reserve Bank of New York President John C. Williams said that he expects inflation to decline to around 3-1/4 percent this year, before moving closer to our longer-run goal in the next two years.

On the other hand, bank shares recover after upbeat banking sector performance and mixed US data, not to forget the firmer closing of Wall Street, as well as recovery in the US Treasury bond yields.

Moving on, US ISM Manufacturing PMI and S&P Global Manufacturing PMI for March can direct intraday moves of the US Dollar Index. However, major attention should be paid to the risk catalysts for clear directions. Among them, Friday’s US jobs report and headlines suggesting inflation woes will be in the spotlight.

Technical analysis

A 13-day-old descending trend line joins the 10-day Exponential Moving Average (EMA) to highlight 102.85 as a short-term key hurdle to watch for the US Dollar Index buyers.