USD Index rose to 3-day highs around 111.80, shifts the focus to NFP

• The index looks bid and gathers further traction around 111.80.
• Further upside in US yields also bolsters the upbeat mood in the buck.
• Initial Claims rose more than expected by 219K WoW.

The greenback, in terms of the USD Index (DXY) extends the weekly recovery to the 111.80 region on Thursday, or 3-day tops.

USD Index now focuses on NFP

The index looks to extend the advance following Wednesday’s strong bounce, while it remains supported by the continuation of the upside momentum in US yields across the curve.

In addition, further loss of momentum in the risk-associated universe collaborates with the second consecutive daily gains in the buck, all ahead of the key Nonfarm Payrolls for the month of September due on Friday.

In the calendar, Initial Claims increased by 219K in the week to October 1, while Challenger Job Cuts went up by 29.989K in September.

What to look for around USD

The index suffers the recovery in the risk complex and returns to the area below the 111.00 level on Thursday.

While the near-term outlook for the dollar looks somewhat dented, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change, Wholesale Inventories (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.38% at 111.62 and faces the next up barrier at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high). On the other hand, a breach of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).