USD Index remains under pressure near 105.00

• The index extends the decline and challenges 105.00.
• Investors continue to digest Friday’s Nonfarm Payrolls.
• FOMC L. Cook speaks later in the NA session.

The greenback, in terms of the USD Index (DXY), hovers around the area of multi-week lows near 105.00 at the beginning of the week.

USD Index looks at risk trends, Fed

The index retreats for the third session in a row on Monday as market participants continue to adjust to the release of October’s softer-than-estimated labour market report, where the US economy created 150K jobs and the jobless rate ticked higher to 3.9%.

In the meantime, the dollar saw its downside momentum gather extra steam in response to investors’ repricing of the continuation of the Fed’s pause in its tightening campaign along with the probability of interest rate cuts at some point around June-July 2024.

There are no data releases scheduled in the US data space on Monday, while FOMC L. Cook (permanent vote, centrist) will speak later in the NA session.

What to look for around USD

The recent sharp corrective move in the index appears to have met some initial contention in the 105.00 neighbourhood so far.

In the meantime, the dollar loses some composure despite the broad-based good health of the US economy and the inflation still running above the Fed’s target, while further cooling of the US labour market now appear to underpin a protracted impasse in the Fed’s current restrictive stance.

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

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China. Potential spread of the Middle East crisis to other regions.

USD Index relevant levels

Now, the index is down 0.05% at 105.01 and faces initial support at initial 104.94 (monthly low November 3) ahead of 104.42 (weekly low September 11) and then 103.51 (200-day SMA). On the other hand, the breakout of 106.88 (weekly high October 26) could expose 107.34 (2023 high October 3) and finally 107.99 (weekly high November 21 2022).