USD Index regains composure around 106.50 ahead of Payrolls

• The index manages to gather some upside traction.
• Bets for a rate hike in the latter part of the year dwindle.
• All the attention will be on the US jobs report.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, looks bid around the 106.50 at the end of the week.

USD Index focuses on data

The index manages to regain some balance and leave behind two consecutive sessions of losses on Friday, regaining the 106.50 region and shifting its focus to another test of the 107.00 neighbourhood.

The recent knee-jerk in the index came pari passu with the equally marked correction in US yields across different maturities, as speculation of further tightening by the Federal Reserve before year-end appears to have been losing momentum as of late.

In the meantime, investors are expected to closely follow the release of the US labour market report, where the economy is expected to have created 170K jobs in September and the Unemployment Rate is projected to have receded to 3.7%.

Other than the US jobs report, the docket includes Consumer Credit Change figures and the speech by FOMC Governor C. Waller (permanent voter, hawk).

What to look for around USD

The dollar attempts a recovery after testing the contention area near 106.50, while th release of US Nonfarm Payrolls for the month of September will take centre stage later in the NA session.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is up 0.14% at 106.49 and a breakout of 107.34 (2023 high October 3) would open the door to 107.99 (weekly high November 21 2022) and finally 110.99 (high November 10 2022). On the downside, the next support emerges at 105.65 (low September 29) ahead of 104.42 (weekly low September 11) and then 103.16 (200-day SMA).