US Dollar Index: DXY struggles to defend 101.00 amid banking woes, focus on US NFP

• US Dollar Index remains defensive after bouncing off one-week low, snapping two-day downtrend.
• Mixed US data, banking sector update allow US Dollar to pare Fed-inflicted losses.
• US employment report for April will be the key as NFP bears downbeat forecasts.

US Dollar Index (DXY) remains sidelined near 101.40 during the early hours of Friday, struggling after posting the first daily gain in three at the weekly low. In doing so, the greenback’s gauge versus the six major currencies portrays the typical pre-NFP anxiety amid mixed updates on the US banking sector and the unimpressive data.

On Thursday, Reuters quotes Fed data suggesting that a large part of the central bank's emergency lending activities in recent weeks were tied up with the now-shuttered First Republic Bank. On the same line was the news, shared via Reuters, “Pressure is growing on US regulators to take more steps to shore up the country's banking sector as a renewed rout in regional lenders' shares forced PacWest Bancorp to explore options to bolster its balance sheet.”

However, the Western Alliance's shares’ rebound after slumping by nearly 60%, backed by its rejection of concerns suggesting that the bank is exploring strategic options, challenged the previous pessimism.

Elsewhere, preliminary readings of Nonfarm Productivity and Unit Labor Cost for the first quarter (Q1) of 2023 came in mixed. That said, Nonfarm Productivity dropped to -2.7% in Q1 from 1.6% prior and -1.8% market forecasts whereas the Unit Labor Cost jumped to 6.3% versus 5.5% expected and 3.3% prior. Further, the US Goods and Services Trade Balance improved to $-64.2B from $-70.6B prior and $-63.3B market forecast. Further, Initial Jobless Claims edge higher to 242K for the week ended on April 28 versus 240K expected and 229K in previous readings.

Against this backdrop, Wall Street closed negative and the yields were pressured too but the US Dollar bounced off its weekly low.

Looking ahead, US Dollar may witness lackluster moves amid mixed signals but can extend the latest rebound as forecasts suggest downbeat prints of the headline Nonfarm Payrolls (NFP), expected 179K versus 236K prior.

Also read: US April Nonfarm Payrolls Preview: Analyzing Gold price's reaction to NFP surprises

Technical analysis

Unless providing a daily close below a three-week-old ascending support line, near 101.20 by the press time, US Dollar Index remains off the bear’s radar.