US Dollar Index: DXY extends post-NFP advances past 104.00 ahead of US ISM Services PMI

• US Dollar Index picks up bids to refresh intraday high, keeping Friday’s rebound despite witnessing the first weekly loss in four.
• Upbeat US NFP, debt-ceiling deal optimism allow US Dollar to remain firmer.
• Fresh fears about US-China ties, pre-data anxiety adds strength to DXY run-up.
• Absence of major catalysts, pre-Fed blackout prod greenback buyers amid receding hawkish bias for Fed, market’s cautious optimism.

US Dollar Index (DXY) holds onto the previous day’s recovery moves amid a sluggish start to the week. That said, the DXY renews its intraday high near 104.15 while stretching the post-NFP rebound amid mixed catalysts and an absence of major data/events. In doing so, the greenback’s gauge versus the six major currencies also cheers the fresh fears about the US-China ties while also portraying the market’s cautious optimism ahead of the US ISM Services PMI and Factory Orders.

DXY bounced off more than a week’s low after the US Nonfarm Payrolls (NFP) renewed hawkish Fed concerns. That said, the US jobs report for May surprised markets with a jump in the headline Nonfarm Payrolls (NFP) by 339K versus 190K expected and 294K prior (revised). It’s worth noting, however, that the Unemployment Rate also rose to 3.7% from 3.4% prior, versus 3.5% market forecasts. It should be noted, that the Average Hourly Earnings eased whereas the Labor Force Participation Rate remain the same as previous.

Elsewhere, the Shangri-la Dialogue in Singapore renewed geopolitical fears surrounding the US and China amid no meeting of the policymakers of both nations, as well as an incident suggesting escalating war fears among the Sino-American navies in the Taiwan Strait. Furthermore, news from Russian Defense Ministry suggesting large-scale military operations by Ukraine also weigh on the sentiment and put a floor under the US Dollar.

On the contrary, US President Joe Biden signed the debt-ceiling bill and avoided the ‘catastrophic’ default. Also negative for the DXY were concerns suggesting slower rate hikes from the major central banks. Furthermore, the global rating agencies remain cautious about the US financial market credibility and prod the US Dollar despite the price-positive move on Friday. “Fitch Ratings said on Friday the United States' "AAA" credit rating would remain on negative watch, despite the agreement that will allow the government to meet its obligations,” said Reuters.

While portraying the mood, Wall Street closed higher and the US Treasury bond yields marked the first weekly loss in four. It’s worth observing that the S&P500 Futures print mild losses amid mixed sentiment.

Looking ahead, US Factory Orders for April and ISM Services PMI for May will be important to watch for the intraday directions as the latest US jobs report renew hawkish bias for the Federal Reserve (Fed) and allow the US Dollar to remain on the buyer’s radar.

Technical analysis

A clear rebound from the 100-day Exponential Moving Average (EMA), around 103.35 by the press time, allows the US Dollar Index (DXY) buyers to remain hopeful of witnessing further upside. However, a successful break of a downward-sloping resistance line from November 2022, close to 104.15 at the latest, becomes necessary for the DXY bull’s conviction.