US Dollar Index bounces off lows, looks to reclaim 96.00

• DXY drops as low as the 95.80 region on Monday.
• Consolidation remains the name of the game around US yields.
• The ADP report surprised to the downside in January.

The greenback remains on the defensive although it managed to bounce off daily lows near 95.80 when measured by the US Dollar Index (DXY).

US Dollar Index stays supported near 95.80

Following fresh multi-day lows around 95.80, the index now regained some composure and looks to reclaim the key 96.00 zone in a context where US yields remain depressed amidst the broad side-lined theme.

The rebound in the dollar came soon after the ADP report showed the US private sector lost 301K jobs during last month, missing consensus although matching previous speculation that the labour market could have suffered the impact of the rapid spread of the omicron variant in past weeks. The drop in the ADP print was the biggest since April 2020, the onset of the pandemic.

What to look for around USD

The dollar’s corrective downside remains well in place, although some decent support seems to have turned up around 95.80. Reasons behind the strong correction in the buck can be found in the improved mood in the risk-associated universe and dormant US yields (despite navigating the upper end of the recent range). However, the constructive outlook for the greenback is expected to remain unchanged in the longer run on the back of rising yields, persistent elevated inflation, supportive Fedspeak and the solid pace of the US economic recovery.

Key events in the US this week:) ADP Employment Change (Wednesday) – Initial Jobless Claims, ISM Non-Manufacturing PMI, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Fed’s rate path this year. US-China trade conflict under the Biden administration. Debt ceiling issues. Escalating geopolitical effervescence vs. Russia and China.

US Dollar Index relevant levels

Now, the index is losing 0.30% at 95.97 and a break above 97.44 (2022 high Jan.28) would open the door to 97.80 (high Jun.30 2020) and finally 98.00 (round level). On the flip side, the next down barrier emerges at 95.80 (weekly low Feb.2) seconded by 95.41 (low Jan.20) and then 94.62 (2022 low Jan.14).