US Dollar Forecast: DXY Gains Despite Weak ADP Report and Shutdown-Driven Data Hold

Published: February 04, 2026, 21:19 GMT+00:00

Key Points

• The U.S. Dollar Index (DXY) is testing a crucial retracement zone for the third consecutive day amidst uncertainty caused by delayed jobs data.
• A weak ADP report indicating only 22,000 jobs added in January has surprisingly strengthened the dollar.
• The near-term direction of DXY is contingent on trader reactions to the key technical level of 97.522.

Market Overview

The U.S. Dollar Index is experiencing a slight increase as it approaches a significant technical retracement zone for the third day in a row. Initially, the index faced pressure due to a partial government shutdown that delayed the release of important jobs data, contributing to uncertainty regarding the timing of the Federal Reserve's anticipated interest rate cuts in 2026.

Weak ADP Report and Dollar Strength

Despite the weak ADP report, which showed that private companies added only 22,000 jobs in January—far below the expected 45,000—there was an unexpected rise in the dollar's value. Typically, a weakening labor market would suggest a bearish outlook for the dollar, as it could lead to rate cuts. However, traders appear to be focusing on other factors, possibly influenced by movements in Treasury yields, which initially fell but later stabilized.

Short-Term vs. Long-Term Outlook

While the current focus is on the short-term fluctuations of the dollar index, analysts are keenly interested in when the dollar will resume its longer-term downtrend. A Reuters survey indicates that currency strategists expect the Fed to implement two rate cuts this year, although this outlook is complicated by concerns regarding the independence of the Federal Reserve. The market is expected to remain rangebound until June, when a new Fed Chair nominee is anticipated to take office.

Technical Analysis of DXY

From a technical standpoint, the DXY is currently in a downtrend. A move below 95.551 would confirm this downtrend, while a rise above 99.492 would indicate a shift to an upward trend. The current short-term range is identified between 99.492 and 95.551, with the DXY testing its retracement zone between 97.522 and 97.987. The recent high of 97.733 falls within this zone.

Future Projections

Looking ahead, the near-term direction of the DXY will likely depend on how traders respond to the 50% retracement level at 97.522. A sustained move above this level could create an upside bias, although the index will encounter resistance at 97.97, the 50-day moving average at 98.432, and the 200-day moving average at 98.601. Conversely, a sustained trade below 97.522 could lead to a decline towards the levels of 96.642 to 96.385.

Conclusion

The current dynamics of the U.S. Dollar Index reflect a complex interplay of economic indicators and market sentiment. As traders navigate through the uncertainty of delayed data and potential Fed actions, the focus remains on key technical levels that will dictate the near-term trajectory of the dollar.