US Dollar Index clings to 20-year high around 107.00 ahead of US ADP Employment data

• DXY remains sidelined around multi-year high, probes four-day uptrend.
• 10-year, 2-year yield curve propels recession fears, FOMC Minutes highlights hawkish Fed bets.
• Softer US statistics, lack of major data/events in Asia allow bulls to take a breather.
• US ADP Employment Change to decorate calendar, risk catalysts are more important for clear directions.

US Dollar Index (DXY) bulls take a breather around 20-year, seesaws around 107.05-10 after the four-day uptrend. That said, the quote’s latest inaction challenges bulls during Thursday’s Asian session. However, the bears need validation from the US ADP Employment Change data and risk catalysts.

That said, the greenback gauge rallied to the highest levels in two decades as softer data couldn’t probe the USD bulls amid hawkish Fed Minutes and yields curve inversion, not to forget economic pessimism in Eurozone.

US ISM Services PMI for June dropped to 55.3 versus 55.9 in May. The actual figure, however, came in better than the market expectation of 54.5. It’s worth noting that the US JOLTS Job Opening for May declined to 11.25 million versus 11.00 million expected and 11.68 million prior.

That said, the US 10-year Treasury yields bounced off a three-week low to 2.93% but the higher print of the 2-year bond coupon, around 2.99%, which in turn hints at the global recession fears. International Monetary Fund (IMF) Managing Director Kristalina Georgieva also said, per Reuters, “Global economic outlook has 'darkened significantly' since last economic update.” the IMF chief also added, “Cannot rule out the possible global recession in 2023.”

Germany and Italy have already signaled early signs of economic slowdown and the bloc’s Retail Sales also dropped to 0.2% in May versus 4.0% recorded in April and 5.4% estimated. Also negative for the old continent were chatters that the European Central Bank’s (ECB) crisis-fighting scheme risks being tied up in legal and political knots, per the Financial Times (FT).

Amid these plays, the Wall Street benchmarks closed with mild gains whereas the S&P 500 Futures remain directionless around 3,850 by the press time.

Moving on, DXY traders should pay attention to the monthly print of the US ADP Employment Change for June, expected 200K versus 128K prior, as it becomes the early signal for Friday’s Nonfarm Payrolls (NFP). Additionally important will be the recession signals and other second-tier US data, like weekly jobless claims and monthly trade numbers.

Also read: ADP Net Employment Change June Preview: Can employment stave off a recession?

Technical analysis

US Dollar Index is gradually rising towards September 2002 high near 109.80 until it stays above the previous resistance line from May 13, close to 106.30 by the press time.