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USD Index appears bid and approaches 102.00 ahead of Payrolls

3 February 2023

The index looks to extend the post-ECB rebound. January Nonfarm Payrolls will take centre stage later. Other key data includes the ISM Non-Manufacturing. The USD Index (DXY), which gauges the greenback vs. a bundle of its main rivals, advances slightly and retargets the key 102.00 barrier at the end of the week.

USD index focuses on NFP, data

The index extends the bounce off 10-month lows near 100.80 recorded on Thursday and shifts its attention back to the 102.00 barrier against the backdrop of rising cautiousness ahead of upcoming key data releases. Indeed, the dollar made a sharp U-turn after market participants perceived as dovish the 50 bps rate hike by the ECB at its event on Thursday, helping DXY to almost fully reverse the post-FOMC steep decline.

Later in the US data space, all the attention will be on the release of the Nonfarm Payrolls for the month of January along with the final S&P Global Services PMI, Unemployment Rate and the ISM Non-Manufacturing.

What to look for around USD

The dollar found in the recent ECB decision on rates an excuse to leave behind the area of 10-month lows near the 100.80 region and now refocuses on the key 102.00 barrier. The idea of a probable pivot/impasse in the Fed’s normalization process continues to hover around the greenback and keeps the price action around the DXY subdued for the time being. This view has been reinforced after the Fed hiked rates by 25 bps on February 1, while speculation of the terminal rate now below 5% gathered some traction as well.

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

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

USD Index relevant levels

Now, the index is gaining 0.11% at 101.84 and faces the next up barrier at 102.60 (weekly high January 31) seconded by 102.89 (January 18) and then 103.94 (55-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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