Some Gains for the Dollar Ahead of 2026’s First NFP

2026 started mostly positively for the US dollar with gains against the euro, Canadian dollar and some other majors. Traders focused in early January on American intervention in Venezuela and generally weaker economic data from the USA, mostly jobs, and the EU, with inflation lower than expected in the eurozone. This article looks ahead to the upcoming job report from the USA on 9 January, then briefly analyzes the charts of EURUSD and USDCAD.

December’s double NFP, rearranged due to the impact of the American government’s longest shutdown to date, came in generally weake,r although the total nonfarm for November was a little better than expected. With no data on unemployment for October, the rate ticked up in November:

Although no number is available for October, the rate of unemployment in the USA has now risen consistently since August 2025, which seems to confirm a slowing job market. That’s not a big surprise to many traders or probably the Fed either: since the end of the second quarter of last year, the average NFP has been significantly lower than what was previously normal in early 2025 and much of 2023 and 2024.

Weaker job data, although growth in GDP remains extremely strong, considering previous expectations have given the Federal Reserve (‘the Fed’) more confidence to cut rates based on statistics and careful evaluation rather than political pressure. November’s annual headline inflation of 2.7% was significantly lower than expected. Around 75% of participants expect at least two cuts by the Fed in 2026, according to CME FedWatch; the first majority expectation for at least one cut is for 29 April’s meeting.

The upcoming NFP on Friday, 9 January, with data for December, is again likely to be difficult to predict given the partial release for October and its possible unreliability. Traders should probably prepare for revisions to the data from November. Current expectations suggest an NFP around 45,000-60,000 and unemployment declining slightly to 4.5%; significant deviation from these would probably drive movement for metals and pairs with the dollar, among possibly others.

Euro-dollar Retreats Towards the Middle of its Range

Euro-dollar reached a low of about a month on 8 January ahead of the NFP as it continued to seem unlikely for the ECB to shift policy in 2026 as inflation in the eurozone remained on target in December. If anything, a hike by the ECB seems more likely than a cut in 2026, but stability seems most probable. Traders mostly discounted somewhat weaker JOLTs on 7 January, while ISM service PMI the same day was stronger than expected.

Momentum in both directions has generally been limited since September last year, and with the price now very close to the bunched 50, 100, and 200 SMAs, it’s questionable whether there’ll be an immediate continuation lower unless the NFP is particularly strong. The slow stochastic recently started to signal oversold, while ATR is extremely low at less than half a cent.

Discounting the NFP temporarily, a likely scenario seems to be a failed test of the 200 SMA followed by a move back up to around $1.18 near the top of the range. However, the American job report is key, so waiting for the results might give more clarity. If the price breaks through the moving averages, which seems quite unlikely for now, the next probable strong support might be around $1.15.

Dollar-loonie’s Bounce Continues

Having started to recover at the very end of December, USDCAD continued to gain at the beginning of 2026 with higher momentum. Likely increasing supply of crude oil, sooner or later, after regime change in Venezuela, and an apparently weaker job market in Canada compared to the USA have been important factors recently. The Bank of Canada’s rate is likely to remain at least a full percent lower than the Fed’s for some months and possibly into late 2026.

Upward momentum increased significantly from 5 January amid a generally high volume of buying, which might suggest further gains. The price is currently overbought based on the slow stochastic, but it seems to have broken through the 200 SMA at least for now. Currently, the 50 SMA from Bands is being tested: if this is successful, the bounce might continue towards the 100 SMA or possibly further ahead, even higher to $1.40.

All of this depends heavily, though, on the results of the job reports on Friday, 9 January. Both the USA and Canada will release their job reports for December at 13.30 GMT then. Expectations for the American NFP seem broadly more positive than for Canada’s report, but given the unpredictability of job data from both countries in recent months, there’s likely to be a strong reaction by USDCAD to the releases.

This article was submitted by Michael Stark, an analyst at Exness.

For the latest analysis, ideas for trading and more, follow Michael on X: @MStarkExness.

The opinions in this article are personal to the writer; they do not represent those of Exness. This is not a recommendation to trade.