US Dollar Index trims losses and returns to the 103.50 region

The US Dollar Index (DXY), which tracks the buck vs. a basket of key rival currencies, now alternates gains with losses in the mid-103.00s on Friday.

US Dollar Index apathetic after upbeat NFP

After printing new highs in the area last seen back in late December 2002 just past the 104.00 hurdle, the index met some selling pressure and receded to the 103.20/15 band against the backdrop of the mixed performance in US yields.

The pullback in the index came despite the US economy added 428K jobs during April, as per the latest Payrolls figures. In addition, the Unemployment Rate stayed put at 3.6%, the Average Hourly Earnings expanded a tad below expectations vs. the previous month and the Participation Rate corrected a little lower to 62.2%.

Later in the session, NY Fed J.Williams (permanent voter, centrist) and Atlanta Fed R.Bostic (2024 voter, centrist) are due to speak, while the Consumer Credit Change for the month of March will close the weekly calendar.

What to look for around USD

The dollar regained its solid appeal and managed to record new highs just beyond the 104.00 mark, or fresh 19-year peaks, as investors’ expectations for a tighter rate path by the Federal Reserve have been nothing but reinforced by the FOMC event on Wednesday. The constructive stance in the dollar is also underpinned by the current elevated inflation narrative and the solid health of the labour market as well as bouts of geopolitical tensions and higher US yields.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is losing 0.05% at 103.49 and the breakout of 104.06 (2022 high May 6) would open the door to 105.00 (round level) and finally 105.63 (high December 11 2002). On the other hand, the next support emerges at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14).