U.S. Dollar Index poised to retest 100.0 as market weighs economic data reports
Dollar struggles below 100 as traders eye key data.
The U.S. Dollar Index (DXY) has been stuck below the key psychological level of 100.0 since last month.
After testing this level last week, the index pulled back to a low of 99.0, marking a significant price decline. A limited recovery followed this dip, and the DXY opened at 99.6 today, Monday, May 5.
However, through the Asian session, the U.S. dollar weakened further, dropping 0.4% to 99.2. As European markets opened, the dollar showed signs of a rebound, trading at 99.4, supported by increased volume. This suggests that the market may test the 100 level once again, but the outlook remains uncertain, depending on the price action's development through the week.
DXY price dynamics (April - May 2025). Source: TradingView
Technically, the 4-hour chart highlights that today's intraday low found support at the 20 and 50-period EMAs, which recently experienced a golden cross. This technical formation suggests a potential for a retest of the 100.0 level. However, a break below these supportive EMAs could signal a shift to a broader downtrend, with the next support level sitting at 98.5. The RSI on the daily chart is also in bearish territory near 40, indicating that the broader momentum is still tilted to the downside, despite today's intraday recovery.
U.S. dollar faces mixed outlook ahead of ISM Services PMI and trade talks
On the fundamental front, last Friday's Nonfarm Payrolls (NFP) report revealed that the U.S. economy added 177,000 jobs in April, exceeding expectations of 130,000. However, this was a slowdown from the revised 185,000 in March. The unemployment rate held steady at 4.2%, while average hourly earnings rose by 3.8% year-over-year, in line with the previous month's pace. These figures offer some positive momentum for the U.S. dollar, as they indicate a resilient labor market despite the deceleration in job growth.
Looking ahead, President Trump confirmed that trade negotiations with China are ongoing, although no direct talks are scheduled for this week. As the market digests these developments, attention will shift to the upcoming ISM Services PMI later today for further direction.
In summary, while the U.S. dollar is showing signs of recovery, the price action and technical indicators suggest that the 100.0 level remains a crucial resistance point. The outcome of key data releases, including the ISM Services PMI and ongoing trade negotiations, could determine whether the dollar can regain strength or face further downside risks.
Rising jobless claims and NFP uncertainty pushed the dollar lower after three days of gains. Technically, the U.S. Dollar Index slipped to 99.50 as bullish momentum faded.
