US Dollar Forecast: DXY Hits Resistance as Risk-On Sentiment Returns

Published: February 06, 2026, 19:51 GMT+00:00

Key Points

• The US Dollar Index (DXY) has stalled at 97.973, just below significant Fibonacci resistance at 97.987.
• Critical support is identified at 97.522; a break below this level could lead to a retracement zone between 96.762 and 96.476.
• The upcoming payrolls report is anticipated to be a catalyst for market movement; weak jobs data could shift expectations for Fed rate cuts and reverse the dollar's bullish momentum.

Current Market Analysis

The US Dollar Index has recently pulled back after reaching a near two-week high at 97.973. It is currently trading at 97.065, down 0.30%. The market is closely watching the 50% retracement level at 97.522, which is crucial for maintaining bullish momentum. A break below this level could signal deeper selling pressure.

Safe-Haven Demand

The dollar has gained 0.7% for the week, benefiting from a return to safe-haven demand as stocks, cryptocurrencies, and metals faced significant sell-offs. Concerns over AI spending have contributed to this market volatility, leading investors to favor the dollar as a safer option.

Fiona Cincotta from City Index noted that safe-haven options are limited, making the dollar a preferred choice among traders.

Market Influences

Recent developments, including Trump's nomination of Kevin Warsh as Fed Chair, have added support to the dollar. Warsh is not viewed as a proponent of rate cuts, which helps maintain the dollar's strength.

Market analysts from Saxo have pointed out that the current environment is influenced by multiple shocks, including scrutiny of Big Tech capital expenditures, risks associated with AI disruption, and liquidity issues stemming from silver-driven margin calls.

Upcoming Catalysts

The next payrolls report is expected to be a significant market mover. Current labor data suggests a slowdown in economic momentum, leading traders to price in higher odds of rate cuts in the first half of the year. Major downward revisions to payrolls could pressure the Fed to consider resuming rate cuts.

Technical Outlook

The dollar's rally has paused just below the key resistance level of 97.987. However, the fundamental backdrop supports a potential upward movement. If the dollar breaks above this resistance, it could gain momentum towards the 50-day moving average at 98.355 and the 200-day at 98.585, confirming a bullish shift.

Conversely, if the payroll data disappoints, the critical support at 97.522 will be tested, and a break below could lead to further declines into the 96.762 to 96.476 range.

Conclusion

The current technical and fundamental indicators suggest a potential for dollar strength, but the market remains sensitive to upcoming economic data and shifts in risk sentiment.