US Dollar Forecast: DXY Falls as Weak Jobs Data and Lower Yields Pressure Greenback

Dollar Under Pressure as Yields Slip and Jobs Data Clouds the Outlook

The Dollar Index is sliding through the mid-session, and sellers are pressing it inside a pivotal zone. The early dip to 98.729 drew some interest, but the bounce is uninspired, keeping the index stuck between the 50% retracement at 98.307 and the 61.8% level at 97.814. Traders are treating this range as a “make or break” pocket — and so far, no side has seized control.

At 17:37 GMT, DXY is trading 98.022, down 0.230 or -0.23%.

The weight is coming from softer U.S. yields and jobs data that raised more questions than answers. With the labor report distorted by the shutdown, traders aren’t leaning too aggressively in either direction, but the weaker unemployment reading is giving dollar sellers enough confidence to stay active.

Fundamentals Lean Soft as Yields Drift Lower

Treasury yields are sliding, and that alone takes some support out from under the dollar. The 10-year at 4.153% and the 2-year at 3.481% reflect a market that’s easing expectations for near-term economic strength. Lower yields cut the relative return on U.S. assets, and that tends to drag the DXY when sellers already have momentum.

The mixed employment picture isn’t helping. November added 64,000 jobs, but October’s revised 105,000 decline feeds the sense that the slowdown is real. The unemployment rate jumping to 4.6% gives traders another reason to expect the Fed to tread carefully. Even so, rate-cut odds barely moved — 24% for January — which keeps rate differentials stable but still tilted slightly against the dollar today.

For now, the market wants cleaner data before making any bigger call on Fed policy. Thursday’s CPI could reset expectations quickly, and traders know it.

Foreign Currencies Find Support Against the Greenback

Cross-currency flows are leaning against the dollar, reinforcing DXY weakness. The euro pushing to $1.1788 and marking a five-session run reflects both softer U.S. yields and mixed euro-zone data that still supports the ECB’s higher-for-longer stance. Sterling is catching a bid as well, trading at $1.3425 ahead of what could be a finely balanced BoE vote.

The yen’s reaction is more complicated, with a BoJ hike essentially priced in. Fiscal worries may cap yen strength, but even a steady yen is enough to keep pressure on the dollar when the broad tone is soft.

Yields and Risk Tone Skew Against the Dollar

The downtick across the curve — from the 1-year to the 30-year — signals lighter conviction in U.S. growth. With the Fed reluctant to lean on distorted labor data, traders are defaulting to a modest risk-on stance. That usually draws money out of the dollar, and that’s exactly what’s happening today.

Technical Picture: A Fragile Make-or-Break Zone

The DXY is boxed in between the 50% level at 98.307 and the 61.8% retracement at 97.814. A push above 98.307 could spark short-covering toward the broader retracement of the drop from 99.312, but sellers are lurking.

If new pressure builds under 98.307, traders will eye a slide through 97.814, exposing 97.462, 97.199, and eventually the major bottom at 96.218. The 50-day MA at 98.127 is adding to the hesitation, while the 200-day at 100.673 is threatening a bearish crossover — a setup that often accelerates downside flows.

Bottom Line: Bias Tilts Bearish

Given the soft tone in yields, mixed jobs signals, steady foreign-currency strength, and a technical setup that offers little cushion, the near-term bias leans bearish. Unless buyers can reclaim 98.307, sellers are likely to keep pressing the index toward the lower end of the zone.

More Information in our Economic Calendar.