US Dollar Index advances to 3-day highs near 98.70

• DXY pushes higher and revisits the 98.70 region.
• US Nonfarm Payrolls came in below estimates at 431K.
• The ISM Manufacturing surprised to the downside in March.

The US Dollar Index (DXY), which gauges the buck vs. a bundle of its main rivals, extends the daily upside to the 98.70 region on Friday.

US Dollar Index stronger post-NFP

The index accelerates gains and is up for the second session in a row, putting at the same time further distance from weekly lows in the 97.70 region recorded on March 30, 31.

The uptick in the dollar comes pari passu with the resumption of the uptrend in US yields across the curve: the short end flirts with recent cycle highs near 2.45%, the belly advances to 3-day tops near 2.45% and the long end approaches the 2.55% level.

The buying pressure on the dollar gathers extra steam after the US economy created 431K jobs in March and the jobless rate dropped more than expected to 3.6%. In addition, further evidence of the tightness of the labour market was seen after the Average Hourly Earnings rose 0.4% MoM and 5.6% from a year earlier.

Finally, Construction Spending expanded 0.5% MoM in February, the Manufacturing PMI came at 58.8 and the ISM Manufacturing unexpectedly deflated to 57.1, both prints for the month of March.

What to look for around USD

The index extends the bounce to the area well north of the 98.00 hurdle at the end of the week. In the meantime, very near-term price action in the greenback continues to be dictated by geopolitics, while the case for a stronger dollar in the medium/long term remains well propped up by the current elevated inflation narrative, a potentially more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.28% at 98.62 and a break above 99.36 (weekly high March 28) would open the door to 99.41 (2022 high March 7) and finally 100.00 (psychological level). On the flip side, the next down barrier emerges at 97.68 (weekly low March 30) seconded by 97.10 (55-day SMA) and then 96.62 (100-day SMA).