USD Index treads water around 103.60 ahead of key US data

• The index trades without direction around 103.60.
• US yields appear side-lined around recent levels.
• Investors’ focus remains on the US NFP, ISM gauge.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, trades within a narrow range around 103.60 at the end of the week.

USD Index now looks at NFP

The index continues to digest Thursday’s strong rebound after three consecutive daily pullbacks, including a drop to fresh lows in levels just below the 103.00 level (August 30).

The dollar’s cautious price action comes in line with the equally prudent developments from US yields across different timeframes, all ahead of the crucial release of the US jobs report for the month of August.

Other than the Nonfarm Payrolls, markets are expected to closely follow the publication of the ISM Manufacturing also for the month of August as well as Construction Spending and the final S&P Global Manufacturing PMI.

What to look for around USD

The index now wobbles around the 103.50/60 band amidst rising cautiousness prior to key data releases in the US calendar on Friday.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Running on the opposite side of the road, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to have regained some traction as of late.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is losing 0.12% at 103.50 and the breach of 102.93 (weekly low August 30) would expose 102.38 (55-day SMA) and then 101.74 (monthly low August 4). On the upside, there is an initial hurdle at 104.44 (monthly high August 25) ahead of 104.69 (monthly high May 31) and finally 105.88 (2023 high March 8).