USD Index gathers extra traction and approaches 103.00 ahead of data

• The index keeps the rally well in place so far.
• US 10-year yields rose to nine-month tops past 4.15%.
• Weekly Initial Claims, ISM Services PMI, Factory Orders next on tap.

The rally in the greenback remains well and sound and lifts the USD Index (DXY) to the vicinity of the key barrier at 103.00 the figure on Thursday.

USD Index focused on data, yields

The index advances for the sixth session in a row and already hovers around the 78.6% Fibo retracement of the sharp drop seen in the first couple of weeks in July in the 102.80/85 band.

The strong uptick in the index comes hand-in-hand with the equally robust performance of US yields, particularly in the belly of the curve, where they hit levels last traded in November 2022 near the 4.20%.

Later in the NA session, the labour market will remain in the centre of the debate – especially following Wednesday’s stronger-than-expected ADP report – with the publication of the usual weekly Initial Claims, seconded by the ISM Services PMI, the final S&P Global Services PMI and Factory Orders.

What to look for around USD

The index keeps the recovery unchanged and keeps the immediate target at the key 103.00 barrier.

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: 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 0.19% at 102.78 and the breakout of 102.84 (weekly high August 3) would open the door to 103.54 (weekly high June 30) and finally 103.61 (200-day SMA). On the other hand, immediate contention emerges at 100.55 (weekly low July 27) prior to 100.00 (psychological level) and then 99.57 (2023 low July 13).