- The index posts decent gains above the 97.00 mark.
- Markets shift the focus back to trade concerns.
- Non-farm Payrolls will be the salient event later today.
The greenback is recovering some ground lost on Thursday, managing to rebound from the area of 3-month lows and retaking the critical barrier at 97.00 the figure when gauged by the US Dollar Index (DXY).
US Dollar Index looks to data
After testing once again the 96.80/75 band on Thursday, the index has regained some composure and it is back to the 97.00 neighbourhood ahead of the opening bell in Euroland.
In fact, the buck remains well on the defensive so far this week as market participants continue to adjust to prospects of a potential shift in the Fed’s monetary policy stance to a more accommodative one, including probable rate cuts.
In addition, trade effervescence stays well in place for the time being following the lack of progress in the US-Mexico front while negotiations between US and China have morphed into verbal threats of further tariffs and retaliatory measures.
In the docket, the most relevant event will be the release of the monthly labour report, where Payrolls are expected to have increased by 185K jobs and the unemployment rate is seen steady at 3.6% during May.
What to look for around USD
The greenback is suffering markets’ perception of a potential rate cut by the Federal Reserve in the upcoming months in light of the persistent decline of US yields, increasing trade tensions, the inversion of the 3M-10Y yield curve and dovish Fedspeak. In the meantime, trade fears have moved from US-China to US-Mexico following recent Trump’s threats, all adding to the idea that a global slowdown is in the offing. However, the Fed remains patient for the time being, closely watching critical upcoming data releases.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.08% at 97.06 and faces the next resistance at 97.44 (55-day SMA) seconded by 98.28 (high May 30) and finally 98.37 (2019 high May 23). On the flip side, a breach of 96.75 (low Jun.5) would open the door for 96.48 (200-day SMA) and then 95.82 (low Feb.28).
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