- The index trades in the lower end of the range near 103.50.
- The US Congress passed the debt ceiling bill on Thursday.
- All the attention will be on the Nonfarm Payrolls later in the session.
The greenback, when gauged by the USD Index (DXY), trades slightly on the defensive around the 103.50 region at the end of the week.
USD Index focused on NFP
The index so far adds to Thursday’s strong pullback and navigates in the area of multi-session lows in the mid-103.00s against the backdrop of persistent appetite for the risk complex ahead of the release of the crucial US jobs report later on Friday.
Contributing to the improved optimism among market participants, the US Senate voted 63-36 in favour of legislation to suspend the US debt ceiling and set spending caps through the 2024 election, bringing an end to a drama that threatened a worldwide financial disaster. The bill now moves to President Biden, who promises to sign it only days before the United States defaults (June 5).
Back at the central banks’ front, the probability of a pause by the Fed at its June 14 gathering now climbs to the boundaries of 80%, according to the FedWatch Tool tracked by CME Group.
In the docket, investors will closely follow the release of the US jobs report for the month of May, when the economy is seen adding 190K jobs and the unemployment rate ticking higher to 3.5%.
What to look for around USD
The index corrects sharply lower and hovers around the 103.50 zone following Thursday’s intense retracement, always on the back of the recent U-turn in expectations of a Fed rate hike later in the month.
In the meantime, bets of another 25 bps at the Fed’s next gathering in June suddenly reversed course in spite of the steady resilience of key US fundamentals (employment and prices, mainly), denting the recent rally in the dollar and favouring a further decline in US yields.
Bolstering a pause by the Fed instead appears to be the extra tightening of credit conditions in response to uncertainty surrounding the US banking sector.
Key events in the US this week: Nonfarm Payrolls, Unemployment Rate (Friday).
Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
USD Index relevant levels
Now, the index is losing 0.08% at 103.48 and faces the next support at the 100-day SMA at 102.91 followed by the 55-day SMA at 102.41 and finally 101.01 (weekly low April 26). On the upside, the breakout of 104.69 (monthly high May 31) would open the door to 105.58 (200-day SMA) and then 105.88 (2023 high March 8).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.