US Dollar holds steady as focus shifts to July jobs report

• The US Dollar consolidate its weekly gains on Friday.
• The US Dollar Index moves sideways near 102.50 after touching a multi-week high on Thursday.
• US July jobs report could drive the USD's performance heading into the weekend.

The US Dollar lost some strength after on Thursday but managed to stabilize early Friday.  The USD Index – which tracks the USD's valuation against a basket of six major currencies – touched its highest level in nearly a month above 102.80 in the European session on Thursday before retreating to the 102.50 area.

The US jobs report for July will be watched closely by market participants ahead of the weekend. Nonfarm Payrolls are forecast to rise by 200,000. The Unemployment Rate is seen holding steady at 3.6% and annual wage inflation is expected to retreat to 4.2% from 4.4% in June. The USD's valuation could be driven the labor market report in the American session due to its potential impact on the Federal Reserve's policy outlook. 

Daily digest market movers: US Dollar consolidates weekly gains

• US stock index futures trade in positive territory and the benchmark 10-year US Treasury bond yield holds comfortably above 4% ahead of the highly-anticipated US jobs report.
• The number of first-time applications for unemployment benefits in the US rose to 227,000 in the week ending July 29, the US Department of Labor reported on Thursday. Additionally, Unit Labor Costs rose 1.6% in the second quarter, following the 3.3% increase recorded in the first quarter and much lower than the market expectation of 2.6%.
• Other US data revealed that the economic activity in the US service sector continued to expand in July, albeit at a softer pace than in June. The ISM Services PMI declined to 52.7 from 53.9, compared to the market forecast of 53. Further details of the publication revealed that the Employment Index edged lower to 50.7 from 53.1, while the Prices Paid Index climbed to 56.8 from 54.1, pointing into increasing input price pressures.
• The US private sector employment rose by 324,000 in July, the data published by Automatic Data Processing (ADP) showed on Wednesday. This reading surpassed the market expectation for an increase of 189,000 and provided further support to the USD. June's figure was revised lower from 497,000 (the highest since February 2022) to 455,000.
• The economy is doing better than expected and a healthy labor market continues to support household spending,” said Nela Richardson, chief economist, ADP. “We continue to see a slowdown in pay growth without broad-based job loss.”
• Global rating agency Fitch announced late Tuesday that it downgraded the US government's credit rating to AA+ from AAA, citing anticipated fiscal deterioration over the next three years and a high and growing general government debt burden. This development caused market participants to stay away from risk-sensitive assets, allowing the USD to find demand as a safe haven. 
• The number of job openings on the last business day of June stood at 9.58 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed 9.61 million openings in May and came in slightly below the market expectation of 9.62 million.
• US ISM Manufacturing PMI improved modestly to 46.4 in July from 46 in June. This reading came in below the market expectation of 46.8 and showed an ongoing contraction in the manufacturing sector's business activity.
• The Employment component of the ISM Manufacturing PMI survey declined to 44.4 from 48.1.
• The Federal Reserve Bank of Dallas' Texas Manufacturing Survey revealed that the headline Manufacturing Business Index edged higher to -20 in July from -23.2 in June.
• Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, fell to 3% on a yearly basis in June from 3.8% in May, the US Bureau of Economic Analysis reported on Friday. This reading came in below the market expectation of 3.1%.
• Core PCE Price Index, the Federal Reserve's preferred gauge of inflation, arrived at 4.1% on a yearly basis, down from 4.6% in May and below the market forecast of 4.2%. Further details of the publication revealed that Personal Income and Personal Spending increased 0.3% and 0.5% on a monthly basis, respectively.
• In an interview with CBS over the weekend, Minneapolis Federal Reserve Bank President Neel Kashkari said that he was not sure whether the Fed was done raising rates. Commenting on the jobs markets, Kashkari noted that it would not surprise him to see the unemployment rate tick up slightly.

Technical analysis: US Dollar Index holds near key technical level

The US Dollar Index (DXY) registered a daily close near 102.50 on Thursday, where the 50-day and the 100-day Simple Moving Averages are located. As long as this level stays intact as support, 103.00 (psychological level, static level) aligns as the next immediate resistance ahead of 103.70 (200-day SMA) and 104.30 (static level from May) could be set as next bullish targets.

Looking south, sellers could show interest if DXY returns below 102.50. In that scenario, 102.00 (psychological level, static level), 101.30 (20-day SMA) and 101.00 (psychological level, static level) could be seen as support levels.