USD Index extends the decline and targets 104.00 ahead of NFP

• The index drops to 6-month lows near 104.50 on Thursday.
• Further losses remain likely after a breakdown of the 200-day SMA.
• US Nonfarm Payrolls are expected at 200K in November.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, remains well on the defensive and revisits multi-month lows around 104.50 at the end of the week.

USD Index looks at Payrolls

The index loses ground for the third session in a row on Friday and drops to levels last seen back in late June near 104.40, always in response to the increasingly deteriorated outlook for the greenback and the pick-up in the sentiment surrounding the risk-associated universe.

The rapid decline in the index has been exacerbated as of late and especially in response to Chair Powell’s speech on Wednesday, where he once again reiterated that a moderation in the pace of future interest rate hikes looks appropriated.

The march lower in the dollar comes in tandem with the absence of direction in US yields across the curve, which seem to have met some initial contention in recent multi-week lows.

Later in the NA session, all the attention will be on the release of the Nonfarm Payrolls for the month of November (200K exp.) and the Unemployment Rate (3.7% exp.), all ahead of the speech by Chicago Fed C.Evans (2023 voter, centrist).

What to look for around USD

The dollar extends the downside and revisits multi-month lows near 104.30 ahead of the key release of the US jobs report for the month of November.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

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

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.24% at 104.48 and the breakdown of 103.41 (weekly low June 16) would pave the way for a test of 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the immediate resistance emerges at 105.55 (200-day SAM) followed by 107.19 (weekly high November 30) and then 107.99 (weekly high November 21).