USD Index Holds Steady at 103.60 Ahead of Crucial US Data

The USD Index (DXY), a gauge of the US dollar’s strength against a basket of major currencies, maintained a relatively stable position around the 103.60 mark as the week drew to a close.

This steadiness in the index follows a robust rebound on Thursday, which followed three consecutive days of decline. During this decline, the USD Index had touched fresh lows, briefly dipping below the 103.00 level on August 30.

The cautious trading of the US dollar mirrors the prudence seen in US Treasury yields across various maturities. All eyes in the financial markets are now on the upcoming release of the US jobs report for August, which is expected to provide critical insights into the state of the labor market.

Besides the Nonfarm Payrolls data, investors are eagerly awaiting other important economic indicators scheduled for release, including the ISM Manufacturing report for August, Construction Spending figures, and the final S&P Global Manufacturing PMI.

At present, the USD Index hovers within the range of 103.50 to 103.60 as market participants exercise caution ahead of these significant data releases on Friday.

Meanwhile, the US dollar continues to find support from the robust performance of the US economy, which has reignited discussions surrounding the Federal Reserve’s policy stance, suggesting the possibility of a prolonged period of tighter monetary measures.

Conversely, there is growing speculation that the US dollar might face headwinds due to the Fed’s data-dependent approach, particularly in the face of persistent disinflationary pressures and signs of a cooling labor market.

Key events on the US economic calendar this week include the Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, and Construction Spending, all of which will be closely monitored by investors.

Additionally, ongoing debates about whether the US economy will experience a soft or hard landing, as well as emerging discussions about potential rate cuts in early 2024, remain important factors influencing market sentiment. Geopolitical tensions with Russia and China also contribute to the overall market landscape.

As of now, the USD Index is trading with a slight 0.12% decline at 103.50. A breach of the weekly low of 102.93 recorded on August 30 could open the door to further losses, with potential support levels at the 55-day Simple Moving Average (SMA) at 102.38 and the monthly low of 101.74 observed on August 4. On the upside, immediate resistance is anticipated at 104.44, marked by the monthly high recorded on August 25, followed by 104.69, the monthly high from May 31, and ultimately 105.88, the peak achieved on March 8, 2023.