US Dollar Forecast: DXY Range-Bound as ADP Report Dampens Rate Cut Bets

Author: James Hyerczyk

Updated: January 07, 2026

Key Points

• The US Dollar Index (DXY) is trading at 98.643, showing slight gains as traders prepare for the upcoming Non-Farm Payrolls report.
• For a bullish rally, DXY needs to break above the 50-day moving average at 99.077.
• The ADP jobs report indicates slower-than-expected private sector job growth, which has reduced expectations for aggressive rate cuts by the Federal Reserve.

Market Overview

The U.S. Dollar Index has been experiencing volatility, with a high of 98.861 and a low of 98.161 this week. Despite these fluctuations, the index is up overall. As of the latest update, it is trading at 98.643, reflecting a modest increase of 0.05%.

Technical Analysis

The DXY has been on an upward trajectory since hitting a multi-month low of 97.749 on December 24. It is currently positioned above a long-term support zone ranging from 98.307 to 97.814. The index's new trading range is identified between 100.395 and 97.749, with a target zone for potential gains between 99.072 and 99.384. The 200-day moving average is at 98.900, while the 50-day moving average is at 99.077, which are critical levels for determining the near-term direction of the index.

Market Sentiment

Traders are currently focused on the upcoming Non-Farm Payrolls report, moving away from concerns regarding U.S. intervention in Venezuela. The sentiment suggests that traders believe there will be no military involvement in Venezuela, which previously had the potential to negatively impact the dollar.

Economic Data Impact

The ADP report released earlier indicated that while private sector job creation was positive in December, it was slower than anticipated. This has contributed to a decrease in expectations for aggressive rate cuts by the Federal Reserve, providing some support for the dollar. However, there are lingering concerns regarding potential tariff refunds that could impact the dollar negatively if the Supreme Court rules against the Trump administration's tariffs.

Outlook

The Dollar Index is expected to remain range-bound as traders await more clarity on Federal Reserve policy. The presence of the 200-day and 50-day moving averages is likely to cap any significant gains until further economic data is released.

Conclusion

In summary, the U.S. Dollar Index is currently in a cautious upward trend, influenced by mixed economic data and market sentiment. Traders are advised to monitor key technical levels and upcoming economic reports to gauge future movements in the dollar.