USD Index comes under pressure around 105.50 ahead of data, NFP

• The index seems to have met some resistance near 105.90.
• Bets for a 50 bps rate hike by the Fed continue to rise.
• Weekly Claims, FOMC’s Barr next of note on Thursday.

The greenback, in terms of the USD Index (DXY), starts the European trading hours slightly on the defensive and around the 105.50 region on Thursday.

USD Index looks at yields, data

The index navigates a narrow range amidst a broad consolidative stance, which is in turn propped up by increasing cautiousness ahead of the release of the US jobs report on Friday.

In the meantime, investors continue to digest Powell’s testimonies (Tuesday and Wednesday) against the backdrop renewed bets of a 50 bps interest rate hike by the Federal Reserve at the March 22 event.

According to FedWatch Tool measured by CME Group, the probability of a half point raise in March hovers around 77%, from just over 9% a month ago.

In the docket, Initial Jobless Claims will be the sole release seconded by the speech of FOMC M.Barr (permanent voter, centrist).

What to look for around USD

The index is expected to keep the prudent stance well in place for the time being in light of the upcoming publication of the US Non-farm Payrolls (March 10).

The dollar now appears well supported by firmer expectations of a 50 bps rate raise at the Fed’s gathering later in the month. This view has been propped up by hawkish message from Fed speakers from many weeks now and lately by Chief Powell at both his testimonies earlier in the week.

In addition, the still elevated inflation as well as the solid labour market and the resilient economy in general also seem to underpin the tighter-for-longer stance from the Federal Reserve.

Key events in the US this week: Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Monthly Budget Statement (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.15% at 105.50 and the breakdown of 104.09 (weekly low March 1) would open the door to 103.52 (55-day SMA) and finally 102.58 (weekly low February 14). On the other hand, the next up-barrier aligns at 105.88 (2023 high March 8) seconded by 106.60 (200-day SMA) and then 107.19 (weekly high November 30 2022).