Volatility subsides around 101.80 as focus shifts to US S&P PMI in US Dollar Index Price Analysis

The US Dollar Index (DXY) has prolonged its correction after falling below immediate support at 101.80 during the Asian session. Following the release of more-than-anticipated Initial Jobless Claims for the week ending April 14 and a lackluster Philadelphia Fed Manufacturing Survey (April), the USD Index fluctuated erratically on Thursday.

The US Department of Labor reported that unemployment claims exceeded expectations for the eleventh consecutive week. The economic data revealed that 245K unemployed people filed for unemployment benefits, exceeding both the consensus estimate and the previous figure of 240K.

Due to the Federal Reserve's (Fed) decision to increase interest rates, labor market conditions are undeniably and persistently deteriorating. Despite this, the market continues to anticipate a 25 basis point (bp) rate hike. According to CME Fedwatch, over 85 percent of probabilities favor interest rates above 5 percent.

In the interim, three consecutive bearish trading sessions on the S&P 500 suggest that investors have supported the risk aversion theme. The yield on 10-year US Treasury bonds has dropped below 3.54 percent.

On a two-hour time frame, the USD Index is consolidating in a wide range between 101.63 and 102.23, indicating the absence of a significant catalyst. After the release of preliminary S&P PMI data for the United States, a power-pack action is anticipated. It is anticipated that the Manufacturing PMI will register 49.0, a decrease from the previous release of 49.9. The Services PMI is expected to fall to 51.5 from the previously reported 52.6.

At 101.85, the 20-period Exponential Moving Average (EMA) intersects with the asset price, indicating a significant decrease in volatility.

In addition, the Relative Strength Index (RSI) (14) oscillates between 40.00 and 60.00, indicating that investors are waiting for a decisive catalyst.

If the asset breaks decisively above the April 17 high of 102.23, investors will push the asset toward the April 10 and March 24 potential resistance levels of 102.76 and 103.36, respectively.

Alternately, a breach of the April 5 low of 101.41 would cause the asset to decline to the April 14 low of 100.78. A subsequent decline will reveal psychological support of $100 for the asset.