US Dollar Index turns negative around 105.00

• The index moderates the initial advance and breaks above the 105.60 level.
• The US economy added more jobs than expected in December.
• Wage growth appears to have lost momentum in the past month.

The dollar index (DXY)which tracks the dollar against a group of its main competitors, trims early gains and returns to negative territory below 105.00 on Friday.

DXY looks offered after payroll

The index quickly leaves behind the previous rally to 4-week highs in the 105.60/65 zone and falls back below 105.00 as investors continue to digest the Non-Farm Payrolls release.

According to the latter, the US economy added 223,000 jobs in December and the unemployment rate fell to 3.5% (from 3.6%). However, the highlight of the report on the labor market is the evolution of salary growth, measured by Average Earnings per Hour, which was moderate after increasing 0.3% month-on-month and 4.6% year-on-year.

The loss of Momentum in Wage Growth seems to give some oxygen to the view that the Fed could pause its tightening plans in the near term, ultimately putting the dollar under some selling pressure along with declining US yields. .UU through the curve.

Aside from payrolls, the US calendar will see ISM Non-Manufacturing, Factory Orders and Atlanta Fed speeches by R.Bostic (2024 voter, aggressive), L.Cook (permanent voter , centrist), FOMC Governor, and T.Barkin (2024 voter, centrist) of the Richmond Fed.

What to keep in mind around the dollar

The dollar falters in the area of ​​multi-week highs, as the latest NFP release appears to have torpedoed the Fed’s long-term tightening narrative.

However, the idea of ​​a Fed pivot has receded further after the release of the FOMC Minutes on Wednesday, in which the Committee defended the need to maintain a tighter stance for longer, while ruling out any reduction. interest rates for the current year.

In addition, the rigidity of the labor market, the still high inflation and the resistance of the economy are also considered supports for the firm message of the Federal Reserve and its cycle of increases.

technical levels

Now, the index loses 0.04% at 105.10 and a break of 103.39 (30 Dec monthly low) would open the door to 101.29 (30 May monthly low) and finally 100.00 (psychological level). To the upside, the next hurdle lies at 105.63 (monthly high Jan 6), followed by 105.82 (weekly high Dec 7) and 106.31 (200-day SMA).