USD Index looks slightly bid around 101.70

• The index advances marginally around 101.70.
• US yields kick off the week with small gains so far.
• Investors’ attention will be on the US labour market this week.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main rival currencies, looks to extend the ongoing rally near the 101.70 region on Monday.

USD Index looks at data, risk trends

The index continues to maintain a positive and optimistic trend, carrying forward the recovery that has been observed in the latter part of the month so far, after an inconclusive session on Friday.

At the same time, the dollar remains in a positive stance, amidst fluctuating risk appetite trends at the beginning of the week, while US yields are attempting a slight rebound as the European markets open on Monday.

Looking ahead, all eyes will be on the US labour market as the week progresses. The release of the ADP report on Wednesday, the usual weekly Initial Claims on Thursday, and the crucial Nonfarm Payrolls on Friday will be closely monitored.

Additionally, the ISM gauges for the manufacturing and services sectors will also be under the spotlight, given the data-dependence context highlighted by the Federal Reserve in its last meeting on July 26.

What to look for around USD

The index keeps the recovery well in place and maintains its target at the key 102.00 hurdle.

In the meantime, the dollar appears benefited from the post-ECB weakness in the risk-associated space, while it could face extra headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market.

Furthermore, speculation that the July hike might have been the last of the current hiking cycle is also expected to keep the buck under some pressure for the time being.

Key events in the US this week: Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Tuesday) – MBA Mortgage Applications, ADP Employment Change (Wednesday) – Initial Jobless Claims, Final Services PMI, ISM Services PMI, Factory Orders (Thursday) – Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023 or early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.10% at 101.79 and the breakout of 102.56 (55-day SMA) would open the door to 103.54 (weekly high June 30 and finally 103.73 (200-day SMA). On the other hand, immediate contention emerges at 100.00 (psychological level) prior to 99.57 (2023 low July 13) and then 97.68 (weekly low March 30).