USD Index maintains the bid bias unchanged above 102.00 ahead of ADP

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, keeps the optimism well and sound for yet another session on Wednesday.

USD Index remains focused on data

The index extends its sharp recovery from lows near 99.50 recorded in mid-July and looks to consolidate further the recent breakout of the key 102.00 hurdle amidst the weekly recovery in US yields across all maturities and the loss of traction in the risk complex.

Indeed, the index closed with losses in only three sessions since the July low in the 99.60/55 band pari passu with the persistent resilience of the US economy and investors’ repricing of further decisions regarding monetary policy by the Federal Reserve as well as other major central banks.

Later in the NA session, the US labour market will be in the centre of the debate with the publication of the ADP report for the month of July, which gauges the job creation by the US private sector. Additional data will see the usual weekly report by MBA on Mortgage Applications.

What to look for around USD

The index keeps the recovery well in place and maintains its initial target at the key 102.60 region, home of the interim 55-day and 100-day SMAs.

In the meantime, the dollar appears benefited from the post-ECB weakness in the risk-associated space, while it could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Furthermore, speculation that the July hike might have been the last of the current hiking cycle is also expected to keep the buck under some pressure for the time being.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change (Wednesday) – Initial Jobless Claims, Final Services PMI, ISM Services PMI, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023 or early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.23% at 102.19 and the breakout of 102.43 (weekly high August 1) would open the door to 103.54 (weekly high June 30) and finally 103.65 (200-day SMA). On the other hand, immediate contention emerges at 100.55 (weekly low July 27) prior to 100.00 (psychological level) and then 99.57 (2023 low July 13).