US Dollar Index under pressure below 99.00, Payrolls eyed

  • DXY extends the move lower to sub-99.00 levels.
  • US 10-year yields trade below the 1.55% area.
  • US Non-farm Payrolls, Powell’s speech to drive sentiment today.

The US Dollar Index (DXY), which gauges the Greenback vs. a basket of its  main rivals, is prolonging the recent breakdown of the key support at 99.00 the figure.

US Dollar Index weaker post-data, now looks to Payrolls

The index came under extra downside pressure on Thursday following another poor prints from the US docket. This time the ISM Non-manufacturing PMI dropped to the lowest level since August 2016 at 52.6, adding to fears of a US recession.

In the wake of the data, yields of the key US 10-year note tumbled further and are now navigating the area around 1.54%, levels last visited in early September.

Later today, all the attention will be on the publication of September’s Non-farm Payrolls, where the economy is expected to have created 145K jobs. Keeping the buck in centre stage, Chief J.Powell will also speak at a ‘Fed Listens’ event.

Furthermore, the usual Fedspeak includes: Boston Fed E.Rosengren (voter, hawkish) will speak at the Boston Fed Conference and Atlanta Fed R.Bostic (2021 voter, centrist) will speak at Tulane University.

What to look for around USD

The index came under further selling pressure after hitting fresh 2019 highs near 99.70 on Tuesday following renewed recession jitters post-poor prints from the ISM manufacturing/non-manufacturing. In this regard, today’s Payrolls results could be key in lifting the sentiment around the buck. On the broader view, the constructive outlook in DXY appears damaged but still in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks. Despite evidence that the US economy could be losing some momentum, the labour market remains strong as well as consumer spending, while the recent pick up in inflation adds to the auspicious domestic scenario vs. the generalized slowdown in most of overseas economies. Domestic data in combination with politics and developments from the US-China trade front should be key in determining the next decision on interest rates amidst Powell’s ‘mid-term adjustment’. Looking at the broader picture, the positive view on the Dollar is also well underpinned by its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is losing 0.02% at 98.89 and faces the next support at 98.64 (21-day SMA) seconded by 98.26 (55-day SMA) and finally 97.86 (monthly low Sep.13). On the upside, a breakout of 99.67 (yearly high Oct.1) would aim for 99.89 (monthly high May 11 2017) and then 100.00 (psychological handle).

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