USD Index climbs to new highs past 105.00 ahead of Payrolls

• The index adds to Thursday’s advance and trespasses 105.00.
• Markets remain largely in a consolidative mood ahead of NFP.
• All the attention shifts to the US labour market, Fedspeak.

The greenback, in terms of the USD Index (DXY), keeps the optimism well and sound and reclaims the area above the 105.00 barrier at the end of the week.

USD Index looks at Payrolls, ISM, Fed speakers

The index adds to Thursday’s gains and manages to climb past 105.00 the figure on Friday, extending the bid bias in the second half of the week as investors continue to assess recent results in US fundamentals.

In the meantime, investors are expected to closely follow the release of the Nonfarm Payrolls for the month of December, where the economy is expected to have created 200K jobs and the jobless rate to remain unchanged at 3.7%.

The results from the US labour market – and particularly, its resilience - have been growing in importance as of late due to its implications for the Fed’s plans regarding its ongoing tightening process.

Other than Payrolls, the US calendar will show the ISM Non-Manufacturing, Factory Orders and speeches by Atlanta Fed R.Bostic (2024 voter, hawk), FOMC Governor L.Cook (permanent voter, centrist) and Richmond Fed T.Barkin (2024 voter, centrist).

What to look for around USD

The dollar keeps the buying bias unchanged in the second half of the week so far, managing well to regain the 105.00 barrier and above.

Meanwhile, the Fed’s pivot narrative has been pushed further forward following the publication of the FOMC Minutes on Wednesday, where the Committee advocated the need to remain within a restrictive stance for longer, at the time when it ruled out any interest rate reduction for the current year.

Furthermore, the tight labour market, still elevated inflation and the resilient economy are also seen supportive of the firm message from the Federal Reserve and its hiking cycle.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, ISM Non-Manufacturing PMI, Factory Orders (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. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.02% at 105.16 and faces the next hurdle at 105.82 (weekly high December 7) followed by 106.31 (200-day SMA) and then 107.19 (weekly high November 30). On the flip side, the breakdown of 103.39 (monthly low December 30) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level).