There is a Slight Advance Above 103.00 for the USD Index as It Remains Bid

EnclaveFX Ltd
Feb 06, 2023

USD Index (DXY) is tracking the greenback modestly around 103.00 ahead of Monday's opening bell on the old continent.

USD Index remains bid following NFP

The index trades in a positive fashion for the third session in a row and hovers around the key 103.00 regions at the beginning of the week.

Indeed, the dollar appears on the bid side as market participants continue to assess Friday’s stellar prints from US Nonfarm Payrolls (+517K). At the same time, speculation of a tighter-for-longer stance from the Federal Reserve remains on the rise.

Nothing noteworthy in the US docket, with only a couple of short-term bill auctions scheduled for later in the NA session.

What to look for around USD

The dollar clings to the area of recent highs around the 103.00 zone in the wake of Friday’s release of unexpectedly strong US Payrolls for the month of January.

The idea of a probable pivot/impasse in the Fed’s normalization process now looks mitigated in favor of a tighter-for-longer narrative, which appears almost exclusively underpinned by the recent NFP prints.

The loss of traction in wage inflation, however, seems to lend some support to the view that the Fed’s tightening cycle has started to impact the robust US labor markets somewhat.

Key events in the US this week: Balance of Trade, Fed Powell, Consumer Credit Change (Tuesday) – MAB Mortgage Applications, Wholesale Inventories (Wednesday) – Initial Jobless Claims (Thursday) – Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. The slower pace of interest rate hikes by the Federal Reserve vs. shrinking odds for a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

Levels relevant to the USD Index

Now, the index is gaining 0.11% at 103.10 and faces the next-up barrier at 103.87 (55-day SMA) seconded by 105.63 (2023 high January 6) and then 106.45 (200-day SMA). On the downside, the breach of 100.82 (2023 low February 2) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21, 2022).


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