US Dollar Index Forecast: Can DXY Break Its Range as NFP Approaches?

Published: January 08, 2026

Key Points

• The US Dollar Index (DXY) is currently stalling near 98.78, with mixed US economic data and weaker labor signals limiting its upside potential ahead of the Nonfarm Payroll (NFP) report.
• ISM Services PMI has increased to 54.4, surpassing expectations, but job market indicators such as JOLTS and ADP data show signs of weakness.
• Traders are anticipating a slowdown in job gains for December, projected at 55,000, down from 64,000 in November.

Market Overview

The US dollar is exhibiting mixed performance, remaining within a consolidating range after reaching an intra-day high of 98.78. Although it gained some traction following the release of mixed economic data, the momentum was short-lived due to weaker labor market signals and cautious investor sentiment. The market is particularly focused on the upcoming Initial Jobless Claims data and the NFP report.

US Economic Data and Fed Signals

Recent economic data from the Institute for Supply Management (ISM) indicates that the US Services PMI has surged to 54.4, up from 52.6 in November, suggesting steady growth in the services sector. However, job market data presents a contrasting picture, with JOLTS Job Openings falling to 7.146 million, below the expected 7.6 million, indicating fewer job opportunities. Additionally, the ADP Employment Change showed an increase of only 41,000 jobs, which is below the anticipated 47,000.

Federal Reserve officials have expressed caution regarding the US economy, with calls for aggressive interest rate cuts to support growth. This sentiment, coupled with the potential for rising unemployment, may weaken the US dollar as lower interest rates typically reduce its attractiveness to investors.

Technical Analysis of the US Dollar Index (DXY)

The DXY is currently trading at $98.73, remaining within a rising channel that has guided price action since late December. The price action shows smaller candle bodies, indicating a period of consolidation rather than a decisive breakout. The index is holding onto a short-term trend line around $98.50, with resistance levels identified between $99.05 and $99.30. The 50-period moving average is rising and closely following the price, while the 200-period average remains above, capping any upside attempts.

RSI indicators are in the mid-50s, suggesting steady momentum without overbought conditions. A clean break outside the current channel could signal the next significant directional move. A potential trading strategy includes buying near $98.50, targeting $99.30, with a stop-loss set just below $98.15.

GBP/USD and EUR/USD Technical Analysis

GBP/USD

The GBP/USD pair is trading near $1.3453, consolidating after a pullback from a swing high of $1.3560. The price is above the 200-period moving average, indicating demand around $1.3440–$1.3460. The trade idea suggests buying near $1.3440, targeting $1.3560, with a stop-loss below $1.3390.

EUR/USD

The EUR/USD pair is stabilizing around $1.1682, following a pullback towards a rising trendline support. The price is currently under the 50-period moving average, with a broader structure reflecting a rising channel. A potential trade strategy includes buying near $1.1660, targeting $1.1740, with a stop-loss below $1.1620.

Conclusion

As the market awaits the NFP report, the mixed economic signals and cautious Fed outlook suggest that the US Dollar Index may remain range-bound. Traders should monitor key support and resistance levels while considering the implications of upcoming economic data on market sentiment.