US Dollar Index: DXY bounces off 200-DMA but lacks follow-though below 104.00, focus on US NFP

• US Dollar Index treads water after posting the biggest daily gain in a week while snapping three-day downtrend.
• US data, pre-NFP consolidation allows DXY traders to pare weekly losses.
• US employment numbers may help Fed hawks to defend “higher for longer” rates and propel Greenback.

US Dollar Index (DXY) struggles to defend the previous day’s rebound from the 200-DMA while making rounds to 103.60 amid Friday’s Asian session. In doing so, the Greenback’s gauge versus the six major currencies portrays the trader’s cautious mood ahead of today’s US monthly employment report, comprising the headline Nonfarm Payrolls (NFP), for August.

After witnessing downbeat prints of consumer confidence and employment clues, the US economic calendar flashed slightly better data on Thursday. The same joins the pre-data consolidation to help the DXY pare weekly losses, the first in seven, as market players await today’s key US jobs report.

It’s worth noting that the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, matched market forecasts of 4.2% YoY and 0.2% MoM versus 4.1% and 0.2% respectively priors. Further, the Initial Jobless Claims dropped to 228K from 232K prior (revised) versus 235K market forecasts while the Chicago Purchasing Managers’ Index rose to 48.7 for August compared to 44.1 expected and 42.8 previous readings. Additionally, Personal Spending rose past the 0.6% expected and previous readings to 0.8% for July whereas Personal Income eased to 0.2% for the said month, from 0.3% market forecast and prior.

Apart from the data, Atlanta Fed President Bostic’s defense of keeping rates high also underpins the DXY rebound.

Elsewhere, market players seek more clues to defend the DXY bulls, which in turn highlights today’s US employment report and the risk catalysts comprising China PMIs and stimulus news. That said, the market forecasts 170K figures of the Nonfarm Payrolls (NFP) versus the previously upbeat outcomes of the JOLTS Job Openings, ADP Employment Change and higher prints of the US Continuing Jobless Claims. Additionally, the three-month average of the US NFP halves to 218K versus a year earlier.

Should the scheduled US jobs report print softer figures, the Fed may show readiness to keep the rates high despite turning down the rate hikes. With this, the US Dollar Index (DXY) may witness a lack of buying.

Technical Analysis

The US Dollar Index (DXY) recovers from the 200-DMA, around 103.05 by the press time, but the recovery needs validation from a six-week-old previous support line, now resistance around 104.00.