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US Dollar struggles near 94.00 mark, US-China trade tensions weigh ahead of NFP

   •  A modest recovery attempt, led by US ISM PMI and FOMC minutes, quickly runs out of steam.
   •  Escalating US-China trade war fears exerts some fresh downward pressure on Friday.
   •  Investors focus shifts to the keenly watched US monthly jobs data for some fresh impetus.

The greenback, as measured by the US Dollar Index held on the back-foot and is currently placed near the 94.00 mark, within striking distance of over one-week lows touched yesterday.

Thursday’s release of upbeat US ISM non-manufacturing PMI and the latest FOMC meeting minutes, reinforcing prospects of gradual monetary policy tightening, did provide a minor lift to the buck.

The uptick quickly ran out of steam amid the ongoing trade spat between the world’s two largest economies. The US imposed tariffs on $34 billion of Chinese imports and China retaliated by applying tariffs to the same value of US goods at the same rate. 

The US President Donald Trump has already warned to impose an additional $500 billion tariffs if China opts for retaliatory measures and escalating risk of a potential full-blown trade war kept the USD bulls on the defensive. 

Investors now turn their attention to the closely-watched US monthly jobs report (NFP), due later in the day, for some fresh impetus, albeit the post-data momentum is likely to be restrained by persistent trade tensions.

Technical levels to watch

A follow-through weakness below the 94.00-93.95 region now seems to pave the way for an extension of the weakening trend further towards the 93.60-55 support area. On the flip side, any meaningful bounce back above 94.20 level is likely to confront resistance near the 94.40-45 region, which if cleared might assist the index to aim back towards conquering the key 95.00 psychological mark.