US Dollar Index stays defensive around 105.00 as US ISM Services PMI looms

• US Dollar struggles to extend the previous day’s gains ahead of the key data.
• Treasury bond Yields retreat after refreshing multi-day high.
• Mixed US data, Fed talks probe US Treasury bond yields’ at multi-day high and challenge DXY bulls.
• US ISM Services PMI is expected to ease in February, can act as a downer for greenback on matching forecasts.

US Dollar Index (DXY) grinds higher around 105.00, struggling to extend the previous day’s run-up during early Friday. In doing so, the greenback’s gauge versus the six major currencies portray the cautious mood ahead of the key US ISM Services PMI for February. Also challenging the DXY bulls could be the latest inaction of the US Treasury bond yields after they refreshed the multi-month high.

The comments from Federal Reserve Bank of Atlanta President Raphael Bostic challenged the market’s hawkish Federal Reserve (Fed) bias as the policymaker said the central bank could be in position to pause the current tightening cycle by mid to late summer. On the other hand, Boston Fed President Susan Collins said on Thursday that more rate hikes are required to bring inflation back in control. She added that the extent of interest rate hikes will be determined by incoming data.

Talking about the US data, the US Jobless Claims dropped to 190K during the week ended on February 24 versus 195K market forecasts and 192K prior. Further, Nonfarm Productivity for the fourth quarter (Q4) eased to 1.7% from 3.0% prior and 2.6% market forecasts while the Unit Labor Costs jumped 3.6% versus 1.6% analysts’ estimations and 1.1% previous readings.

Elsewhere, the US-China tension at the Group of 20 Nations (G20) meeting, amid the former’s push for sanctions on countries having strong ties with Russia and aiding Moscow in war with Ukraine, previously probed the sentiment. However, the dovish Fed comments and chatters of the Sino-American trade talks seemed to have triggered a risk-on mood afterward.

Amid these plays, Wall Street closed on the positive side, after a downbeat start, whereas the S&P 500 Futures printed mild losses by the press time. Further, US 10-year Treasury bond yields rose to a fresh high since early November 2022 while piercing the 4.0% threshold whereas the two-year counterpart rallied to the highest levels since 2007 to 4.94%. However, the bond coupons have retreated from their multi-month high of late.

Moving on, the DXY traders should pay attention to the US ISM Services PMI for February, expected 54.5 versus 55.2.

Technical analysis

A three-month-old descending resistance line, around 105.20 appears the key hurdle for the US Dollar Index bulls.