USD Index: Upside takes a breather ahead of Payrolls

• The index comes under some selling pressure near 112.50.
• US yields continue their march north to multi-session peaks.
• Nonfarm Payrolls and the Unemployment Rate will take centre stage later.

The greenback, in terms of the USD Index (DXY), meets a decent resistance region in the 112.50 at the end of the week.

USD index focuses on data

The index now slips back to the 112.00 neighbourhood and trades slightly on the defensive amidst some recovery in the risk complex and broad-based cautiousness ahead of the release of September’s Nonfarm Payrolls later in the NA session.

The results from the job creation during last month has grown in importance in past sessions, as it could determine the size of the next rate hike by the Fed and probably give a hint regarding the probable extension of the normalization process.

Other than Payrolls, the Unemployment Rate is due along with Wholesale Inventories, Consumer Credit Change and the speech by NY Fed J.Williams (permanent voter, centrist).

 What to look for around USD

The index managed to advance to the 112.50 region, where it seems to have met some decent hurdle for the time being.

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: 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 losing 0.08% at 112.16 and 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). On the other hand, the next up barrier emerges at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high).