US Dollar Index: DXY edges above 104.00 despite Biden-McCarthy debt ceiling agreement, US NFP eyed

• US Dollar Index seesaws near the highest levels in 2.5 months, picks up bids of late.
• US President Biden, House Speaker McCarthy’s debt ceiling deal is in woods amid policymakers’ discomfort.
• Holidays in major markets may prod the DXY bulls.
• Hawkish Fed bets highlight US NFP as another key catalyst.

US Dollar Index (DXY) makes rounds to 104.25-30 during early Monday as it struggles to cheer the US debt ceiling agreement amid uncertainty surrounding its passage through Congress. Additionally challenging the DXY buyers could be the holidays in multiple markets and cautious mood ahead of this week’s US jobs report.

Although US President Joe Biden and House Speaker Kevin McCarthy reached a tentative deal to raise the Federal government's $31.4 trillion debt ceiling through January 2025, the agreement lacks support from some of the leftists and rightists due to the compromises involved. That said, the debt ceiling deal needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default. Recently, US President Biden ‘strongly’ urged both chambers to pass the agreement. Even so, the upbeat US data and hawkish Fed bets keep the DXY buyers hopeful.

Market players are getting more optimistic about the Federal Reserve’s (Fed) 0.25% rate hike in June after Friday’s upbeat US data, as well as the welcome growth figures marked earlier in the last week.

US Durable Goods Orders for April came in better-than-forecast to 1.1% from 3.3% prior, versus -1.0% expected. Further, Nondefense Capital Goods Orders ex Aircraft, also known as the Core Durable Goods Orders, marked upbeat growth of 1.4% compared to -0.2% anticipated and -0.6% previous readings. Additionally, the Core PCE Price Index for the said month rose past market forecasts and previous readings of 0.3% MoM and 4.6% YoY to 0.4% and 4.7% in that order.

Not only the data, but comments from influential personalities also underpin the bullish bias about the US Dollar. International Monetary Fund Managing (IMF) Director Kristalina Georgieva stated that the US interest rates will need to be higher for longer. Alternatively, Federal Reserve Bank of Cleveland President Loretta Mester said that the Personal Consumption Expenditures (PCE) Price Index released on Friday underscored the slow progress on inflation. During the weekend, Federal Reserve Bank of Chicago President Austan Goolsbee welcomed the US debt ceiling news while also saying, amid the CBS Show “Face the Nation”, “I try to make it a point not to prejudge and make decisions when you are still weeks out from the meeting."

Against this backdrop, Wall Street closed on a positive note while S&P500 Futures print mild gains as it cheers the US debt ceiling deal whereas the holidays in major bourses restrict the bond market moves of late.

Looking ahead, Monday’s off in major trading frontiers may allow the DXY bull to take a breather. That said, this week’s US jobs report for May and the US Congress voting on the debt ceiling deal will be key to watching for clear directions.

Technical analysis

Friday’s Doji candlestick challenges the US Dollar Index (DXY) bulls unless the quote remains below the latest peak of around 104.45. However, the 200-day Exponential Moving Average (EMA) level surrounding 103.85 puts a floor under the DXY prices.