US Dollar Index: DXY bulls are still in the game around 102.50 as yields remain firmer ahead of US NFP

• US Dollar Index stabilizes after reversing from one-month high.
• US 10-year Treasury bond yields seesaw near the worrisome levels of late 2022 that triggered market’s panic.
• Mostly upbeat US statistics, cautious mood ahead of US NFP keep DXY buyers hopeful.
• Early signals hint at positive surprise from US employment report for July, keeping US Dollar Index bulls on watch.

US Dollar Index (DXY) makes rounds to 102.50 as it challenges the previous day’s U-turn from the highest level in a month during early Friday. In doing so, the Greenback’s gauge versus six major currencies justifies the market’s hopes of witnessing an upbeat employment report from the US, as well as takes clues from the strong US Treasury bond yields, to keep buyers hopeful.

It’s worth noting that the early signals of the US jobs report have been positive, underpinning the hopes of witnessing firmer US Nonfarm Payrolls (NFP) and Unemployment  Rate.

On Wednesday, US ADP Employment Change for July rose past 189K markets forecasts to 324K while the previous readings were revised down to 455K.

Following that, US ISM Services PMI dropped to 52.7 for July from 53.9 prior, versus 53.0 market forecasts. The details of the ISM Services Survey unveiled that Employment Index and New Order Index also came in softer but the Prices Paid jumped to a three-month high. Further, the US Factory Orders improved to 2.3% MoM for June versus 0.4% prior (revised) and 2.2% market forecasts while Initial Jobless Claims matches 227K expected figures for the week ended on July 28 from 221K prior. Additionally, the preliminary readings of the Nonfarm Productivity for the second quarter (Q2) rallied by 3.7% compared to 2.0% expected and -1.2% previous readings whereas Unit Labor Cost eased to 1.6% for the said period versus 2.6% consensus and 3.3% prior.

Elsewhere, the US 10-year Treasury bond yields rose to a fresh high since November 2022 before ending the trading day near 4.18% whereas the Wall Street benchmark marked mild losses by the end of Thursday’s North American session. It’s worth noting that the US bond coupons are heading towards the worrisome levels that previously triggered economic hardships, which in turn tease the US Dollar bulls due to its haven allure.

Additionally, fears of witnessing more US-China tension and additional stimulus from Beijing also underpin the DXY optimism. Recently, Reuters came out with the news stating that Key Republican urges Biden to set broad restrictions on US investments in China. On the other hand, People's Bank of China governor Pan Gongsheng was spotted meeting big property developers from China and assured them to provide the needed help to defend the housing sector.

Looking ahead, the pre-NFP mood may restrict DXY moves but the headline Nonfarm Payrolls (NFP) bears downbeat market forecasts, likely softening to 200K versus 209K prior, which in turn may prod the US Dollar bulls in case of downbeat prints. Further, the Unemployment Rate is likely to remain static at 3.6%.

Technical analysis

Although a nine-week-old faling resistance line challenges the US Dollar Index bulls near 102.65, the pullback moves remain elusive unless witnessing a clear downside break of the 100-DMA level of around 102.30. It’s worth noting that the bullish MACD signals and an absence of overbought RSI keeps DXY buyers hopeful.