US Dollar Forecast: Jobs Report Could Trigger Breakout or Rejection at 98.238

Dollar Posts Weekly Gain as Data Undercuts Dovish Momentum

The U.S. Dollar Index (DXY) closed last week at 98.182, up 0.55%, notching its second consecutive weekly advance. While Friday’s modest dip followed a steady core PCE inflation print and strong spending figures, the broader tone remained constructive as resilient U.S. data continued to dull expectations for aggressive Federal Reserve rate cuts.

Revised Q3 GDP surged to 3.8%, beating the prior 3.3% estimate, while personal spending rose 0.6% and jobless claims dropped to 218,000—well below forecasts. These figures reinforced a theme of economic durability that has clashed with prevailing market pricing for two more cuts this year. With inflation still at 2.9% year-over-year, the Fed’s room to ease remains constrained.

Fed Policy Split Deepens as Rate Path Remains Unsettled

Fed commentary throughout the week highlighted the growing divide inside the central bank. Richmond Fed President Thomas Barkin signaled limited risk to inflation and employment, suggesting a steady hand. In contrast, Vice Chair Michelle Bowman kept the door open to protective rate cuts, citing labor market risks. Yet, Chair Powell has held firm to a cautious stance, warning that premature easing could reignite inflation.

Markets are still pricing in an 89.8% probability of a 25-basis-point cut in October, according to CME FedWatch, though conviction has waned slightly. With consumer resilience showing few signs of deterioration, the argument for immediate easing continues to weaken.

Jobs Data Looms Large for Next Leg

The coming week will be critical, with labor market updates likely to set the tone for October’s rate decision. Tuesday’s JOLTS report, Wednesday’s ADP payrolls, and Friday’s nonfarm payrolls will offer clarity on employment trends. Economists expect a modest rebound in jobs added—from 22,000 in August to 50,000 in September—though a potential government shutdown could delay data release.

A materially soft jobs print could revive rate cut momentum. Conversely, continued signs of labor market tightness may cement the Fed’s patient posture and fuel further dollar strength.

Forecast: DXY Faces Crucial Resistance at 99.098—Breakout or Fade?

Technically, the DXY remains buoyant above its key support at 97.411, with major backing at 96.218. However, the index is now pressing into a resistance zone defined by dual 50% retracement levels—first at 98.238 and next at 99.098. A close above 99.098 with strong volume would signal a confirmed breakout, opening the door toward 100.257.

Until that happens, trader reaction to 98.238 will shape near-term tone. As long as the Fed avoids dovish surprises and data stays firm, the dollar remains well-positioned to grind higher. However, failure to clear 99.098 could prompt consolidation back toward support. Next week’s jobs data will likely decide the direction.

More Information in our Economic Calendar.