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US Dollar Flat Ahead of Key Jobs Report, Powell Testimony and ECB Decision

The US Dollar (USD) is surrendering recent gains this Friday, set to close the week near flat despite contradictory signals from economic data and Federal Reserve (Fed) commentary. While ISM and University of Michigan data suggest inflationary pressures could re-emerge, Fed officials maintain confidence in the disinflationary trend, downplaying recent inflation readings and reaffirming a commitment to restoring price stability.

With the week’s major US economic releases behind us, the focus shifts to next week’s highly anticipated US Jobs Report and Fed Chair Jerome Powell’s testimony before Congress. The Jobs Report promises to be a highly influential factor in shaping market expectations for future rate adjustments. Additional Fed speeches later this Friday could offer further nuance on the central bank’s stance.

For now, the US Dollar Index (DXY) remains largely rangebound, caught between conflicting signals on the inflation outlook and Fed policy. Traders appear cautious ahead of next week’s key events, potentially holding back on major trades until a clearer picture emerges. Technically, the recent breach of the 100-day Simple Moving Average (SMA) near 103.97 appears fragile, with a short-term move to 104.60 needed for further bullish momentum towards 105.12 and potentially last year’s highs. On the downside, the recently breached 200-day SMA at 103.74 remains a possible support level, with further weakness potentially opening the door to a test of the 55-day SMA near 103.16 and the 103.00 mark.