US dollar index retreats modestly, remains around 101.00 ahead of NFP

The US dollar index pulled back on Thursday amid a recovery in European currencies and the yen. It traded within yesterday’s range and bottomed during the American session slightly below 101.00. 

It was about to end the day with a modest decline, as it continues to consolidate around 101.30. The Greenback failed to rise versus European currencies and the yen despite the ongoing sell-off in US bonds that pushed the 10-year yield to 2.47%, the highest in 18 months.

Among currencies, the top performer on Thursday was the Canadian dollar boosted by the rally in crude oil prices. The WTI barrel rose almost $4 and reached levels on top of $51.00. 

“US interest rates rose further, helped by a further rise in oil prices (+18% since OPEC agreement) and strong economic data. The US dollar remained in consolidation mode though”, said Imre Speizer from Westpac.

Regarding economic data, the US ISM manufacturing rose from 51.9 to 53.2 and the PMI climbed to 54.1. On the flip side, initial jobless claims rose to 268K (vs 253K expected). 

DXY before NFP 

On Friday, the US official employment report will be released. Non-farm payrolls are expected to rise by 175K and the unemployment rate to stay at 4.9%. The DXY awaits the report near the highest level in 13 years. 

Technical indicators show overbought conditions in the dollar index but so far no major signals of a correction are seen; only some exhaustion to the upside. Some analysts point out that tomorrow’s NFP number are likely to have a limited impact on the US dollar because it won’t change significantly the expectation that the Federal Reserve will raise rates in December.