USD Index remains under pressure near 101.00 ahead of Payrolls

• The index fades part of Thursday’s strong gains.
• Markets appear to favour the risk complex early on Friday.
• April’s Nonfarm Payrolls takes centre stage in the NA session.

The greenback resumes the downside and returns to the low-101.00s when measured by the USD Index (DXY) at the end of the week.

USD Index looks at the jobs report

It seems the index could not sustain Thursday’s marked advance and returned to the negative territory, always in the lower end of the recent range and so far supported by the 101.00 zone.

In the meantime, investors continue to digest the FOMC event (Wednesday) and the increasing likelihood that the Fed might pause its hiking cycle as soon as at the next meeting in June.

On this, the publication of the US jobs report later in the NA session will be crucial amidst the renewed Fed’s data dependent stance when it comes to decisions on future interest rates, as emphasized by Chief Powell on Wednesday.

What to look for around USD

The index trades close to the 101.00 zone in tandem with investors’ assessment of the last FOMC event.

The index seems to be facing downward pressure in light of the Fed’s recent indication that it will probably pause its normalization process in the near future. That said, the future direction of monetary policy will be determined by the performance of key fundamentals (employment and prices mainly).

In favour of a Fed’s pause appears the persevering disinflation – despite consumer prices remain well above the target - and nascent easing in the labour market, all amidst steady speculation of a a probable recession.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change.

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is losing 0.21% at 101.24 and faces initial contention at 101.01 (weekly low April 26) prior to 100.78 (2023 low April 14) and finally 100.00 (psychological level). On the other hand, the break above 102.40 (monthly high May 2) would open the door to 102.80 (weekly high April 10) and then 103.05 (monthly high April 3).