US Dollar Index Forecast: Can DXY Break Its Range as NFP Approaches?

Market Overview

The broad-based US dollar is showing mixed performance and stuck in the consolidating range after hitting the intra-day high of 98.78 level. However, it gained some traction after the previous mixed US economic data was released, but the gains were short-lived as weaker labor market signals and cautious investor sentiment limited further upside.

Looking forward, traders will watch US Initial Jobless Claims data today. Moreover, focus shifts to Friday’s US Nonfarm Payrolls report, expected to show 55,000 job gains in December, down from November’s 64,000.

US Economic Data and Fed Signals Keep Dollar Mixed

On the fundamental side, the Institute for Supply Management (ISM) reported that the US Services PMI surged to 54.4 from 52.6 in November. It has beaten expectations of 52.3, suggesting the services sector is growing steadily. However, job market data showed some weakness.

Meanwhile, JOLTS Job Openings dropped to 7.146 million in November, which is under the expected 7.6 million. This indicates fewer available jobs.

Similarly, the ADP Employment Change showed an increase of 41,000 jobs, slightly below the expected 47,000, following a small decline in November. This mixed economic data could keep the US dollar steady, with just a small chance of rising.

Meanwhile, Fed officials signaled caution for the US economy. Fed Governor Stephen Miran mentioned the need for aggressive interest rate cuts this year to support growth. Minneapolis Fed President Neel Kashkari warned that unemployment could rise faster than expected.

Hence, the cautious signals from Fed officials, along with hints of aggressive rate cuts, are likely to weaken the US dollar, as lower interest rates make it less attractive to investors seeking higher returns.

US Dollar Index (DXY) – Technical Analysis

The US Dollar Index (DXY) currently trades at $98.73 on the 2-Hour chart, still stuck in the middle of a rising channel that’s been guiding price action since late December. The candles have recently been painting smaller bodies, with a bit of wackiness in those whiskers near mid-channel, suggesting it’s time for some consolidation rather than a clean break. The index is still clinging to that short-term trend line around $98.50, and that’s where your resistance comes in, about $99.05 to $99.30.

Meanwhile, the 50-period moving average is rising and right on the heels of price, and the 200-period average, way above, is still putting the lid on any upside attempts. The RSIs are stuck in the mid-50s, which says steady momentum without that overbuying pressure that can give you a headache.

With all that in mind, a clean break outside that channel will point the way for the next significant directional move. The trade idea is to buy near $98.50, with a target of $99.30 and a stop-loss just below $98.15.

GBP/USD Technical Analysis

The GBP/USD pair is trading near the $1.3453 mark on Thursday. On the 2-hour chart, the direct currency pair is consolidating after pulling back from the $1.3560 swing high. Recent Japanese candlesticks have closed with smaller bodies near a rising trendline, signaling demand emerging around $1.3440–$1.3460 rather than aggressive selling.

Whereas the pair’s price is sitting just above the 200-period moving average (MA), while the 50-period average has flattened. It’s reflecting short-term indecision among market participants within an upward channel.

The horizontal support level is at around $1.3400, along with resistance layered around $1.3520–$1.3560. RSI is drifting toward the mid-40s, showing easing momentum but no oversold signal. Structure favors consolidation over reversal. Overall, the trade idea is to look for a buy near $1.3440, target $1.3560, and stop below $1.3390.

EUR/USD Technical Forecast

The EUR/USD pair is trading at around $1.1682 on the 2-hour chart. It’s stabilizing following a pullback toward rising trendline support drawn from early December. Candlesticks, the recent ones, are showing smaller bodies and lower wicks near $1.1660–$1.1680, which is signaling buying interest at support rather than renewed selling.

Overall, the EUR/USD price is holding under 50-period moving average, whereas the 200-period average is near $1.1720, capping near-term rebounds. The broader structure still reflects a rising channel, keeping the medium-term bias constructive.

RSI is holding in the low-40s, suggesting cooling momentum without oversold conditions. A base above trend support keeps the recovery scenario intact. The trade idea is to buy near $1.1660, target $1.1740, stop below $1.1620.