US Dollar Index keeps the trade above 96.00 ahead of NFP

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, trades on a steady fashion just above the 96.00 yardstick on Friday.

US Dollar Index looks to data

The index looks to extend the weekly recovery amidst the persistent cautiousness among market participants ahead of the key release of the monthly US labour market report.

Further support for the dollar came after several Fed-speakers (Bostic, Daly, Mester, Quarles, Barkin) reinforced on Thursday the idea of a faster tapering pace as well as a sooner-than-anticipated rates lift-off.

Friday’s price action in the dollar so far comes amidst the mixed performance in the US cash markets, where yields of the 2y note climb past 0.62%, while yields of the 10y and 30y notes trade within a mild downside pressure.

Later in the session, the November’s Nonfarm Payrolls will take centre stage seconded by the Unemployment Rate, Factory Orders, the ISM Non-Manufacturing and Markit’s final Services PMI.

What to look for around USD

The dollar reclaimed the 96.00 mark and looks to extend the weekly recovery albeit at a glacial pace. The re-emergence of the risk aversion in response to omicron concerns, Fedspeak supportive of a quicker tapering pace and the likeliness of a Fed’s move on rates earlier than estimated continue to lend support to the buck against the backdrop of an inconclusive performance in US yields across the curve and the “higher-for-longer” narrative around current elevated inflation pressures.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Factory Orders, ISM Non-Manufacturing (Friday).

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Debt ceiling issue. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.05% at 96.18 and a break above 96.93 (2021 high Nov.24) would open the door to 97.00 (round level) and then 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 95.51 (weekly low Nov.30) followed by 94.96 (weekly low Nov.15) and finally 94.44 (low Nov.18).