DXY Dollar Index under pressure, challenges 104.00 level

• The DXY index is experiencing some selling pressure near the recent highs.
• US markets will be closed on Monday due to the Labor Day holiday.
• Markets continue to digest Friday’s Nonfarm Payrolls report.

The DXY Dollar Index, which measures the strength of the dollar against a basket of currencies, is facing some bearish pressure around recent highs near 104.30.

DXY Index Focuses on Fed and Risk Trends

The DXY Index is now under tepid selling pressure after two consecutive daily advances, including a move above the key 104.00 barrier in the second half of last week.

Meanwhile, market participants continue to digest Friday’s Nonfarm Payrolls report, in which the US economy created more jobs than initially estimated (187,000 jobs), even though the unemployment rate rose to 3.8% and inflation rose. Salary seems to have cooled off a bit over the past month.

Returning to the Fed, investors remain in favor of the Fed keeping interest rates unchanged for the remainder of the year, especially after the recent results of the jobs report, as well as other fundamental data from the US. .

There will be no activity in US markets on Monday due to the Labor Day holiday, while factory orders, ISM services PMI and weekly initial jobless claims are expected to take center stage later in the week.

What can we expect around the DXY index?

The recent strong rally in the DXY Index appears to have found an initial bullish barrier around the 104.30 area so far.

Meanwhile, additional support for the dollar comes from the good health of the US economy, which appears to have reignited the narrative around the Federal Reserve’s tightening stance.

On the other hand, the idea that the dollar could face headwinds in response to the Fed’s data-dependent stance in the current context of persistent disinflation and cooling labor market seems to be losing steam of late.

Relevant DXY Index Levels

At time of writing, the DXY Index is down 0.12% on the day, trading at 104.13. A break of 103.04 (200-day SMA) would open the door to 102.93 (Aug 30 low) and 102.42 (55-day SMA). To the upside, there is an initial hurdle at 104.44 (25 Aug high) before 104.69 (31 May high) and 105.88 (8 Mar high).