US Dollar Forecast: Modest Recovery for DXY as Traders Brace for Fed and BLS Appointments

Greenback Stabilizes After Friday’s Drop

The U.S. Dollar Index (DXY) rose 0.2% to 98.82 on Monday, staging a modest recovery following Friday’s sharp sell-off triggered by a disappointing jobs report, a surprise Fed resignation, and political intervention in statistical agencies.

The bounce coincided with firm Treasury yields and a lack of panic in risk markets, helping the dollar regain footing after falling more than 1.37% last Friday’s session.

Friday’s job data showed U.S. nonfarm payrolls for July missed expectations, while downward revisions to May and June slashed 258,000 jobs off previous counts. This raised alarms over labor market deterioration and fueled rate cut bets.

President Trump’s dismissal of Bureau of Labor Statistics head Erika McEntarfer, alongside Fed Governor Adriana Kugler’s resignation, added to political unease, with traders bracing for new appointments that may shift policy dovishly.

Fed Rate Cut Bets Surge; Yields Reflect Shift

Markets are now pricing in an 84% probability of a 25 basis point Fed cut in September, with 60 basis points of easing projected by year-end, CME’s FedWatch tool shows. The policy-sensitive 2-year Treasury yield dropped to 3.659%, its lowest in three months, while the 10-year yield hovered near a one-month low of 4.2257%.

Despite these signals, strong corporate earnings are offsetting broader concerns, and safe-haven flows remain contained. As Karl Schamotta of Corpay noted, investors are “keeping their powder dry” ahead of Trump’s imminent Fed and BLS nominations.

Dollar Technicals Signal Pivotal Test Ahead

From a technical standpoint, the daily swing chart still shows an uptrend, defined by a higher-bottom, higher-top formation. A move above 100.257 would reaffirm this trend, negating Friday’s reversal top.

However, failure to hold the 50-day moving average at 98.300 could open the door to a retest of the key swing low at 97.109. Momentum remains fragile below the minor pivot levels at 98.683 and 98.317.

Intermediate trend support sits firmly at the 50-day moving average, while longer-term sentiment remains bearish, with the 200-day moving average still elevated at 103.245.

Market Outlook: Eyes on Fed Appointments and 98.300 Level

The near-term direction for DXY will hinge on trader reaction to the 98.300 support level. A hold could spark renewed buying interest, targeting resistance at 99.177 and 99.838. However, a breakdown may prompt deeper retracements.

Traders should remain focused on incoming Fed appointments and September rate cut odds, as these will drive the greenback’s next leg.

More Information in our Economic Calendar.