US Dollar Price Forecast: DXY Wavers Despite Strong NFP – Will GBP/USD and EUR/USD Surge?

Market Overview

Despite stronger-than-expected NFP report, the broad-based US dollar failed to extend its bullish bias and turned bearish on the day. As of now, the US dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, is trading near 96.80.

However, the reason behind its fall could be the weaker-than-expected US Retail Sales in December and cautious remarks from White House economic adviser Kevin Hassett.

Hassett said jobs might grow more slowly in the coming months because the workforce is growing less and workers are doing more on their own.

Strong US Jobs Data Offers Some Support

On the other hand, the previously released upbeat US jobs data provided some relief to the Dollar. On the data front, the Bureau of Labor Statistics reported that the US economy added 130,000 jobs in January, above the forecast of 70,000. The unemployment rate also fell slightly to 4.3% from 4.4%, better than expected.

Beth Hammack from the Cleveland Fed said the unemployment rate is steady after the January jobs report. Meanwhile, Jeff Schmid from the Kansas City Fed added that the Fed should keep interest rates high to control inflation, as the economy is still running strong, which keeps the Fed cautious.

Consequently, financial markets are now pricing in nearly a 94% probability that the Fed will leave rates unchanged at its next meeting, up from 80% the previous day, according to the CME FedWatch tool.

Investors Eye Jobless Claims and CPI Data for Clues on Dollar and Fed Moves

Looking Ahead, investors are closely watching the upcoming US weekly Initial Jobless Claims report later today and the Consumer Price Index (CPI) inflation data on Friday.

For example, any unexpected news from these reports could change the Dollar’s direction and affect what traders expect from the Fed.

US Dollar Index Outlook: DXY Trapped Between 97.25 Resistance and 96.34 Support

On the 4-hour chart, the US Dollar Index (DXY) is trading around the 96.78 level. The index is currently stuck in a consolidation phase between the 200-period moving average (blue line) near 97.90 and a long-term upward trendline that has been supporting the price since late January. After a sharp drop from the 98.80 area, DXY found a floor near 95.55 and has been carving out higher lows since.

This structure suggests the dollar is trying to stabilize, but it’s facing stiff resistance. The recent candlesticks show a lot of “choppiness”—small bodies with wicks on both sides—indicating that neither the bulls nor the bears have full control right now.

The 50-period moving average (red line) is sloping downward and acting as immediate overhead resistance near the 97.21 level. As long as the price stays below this MA, the short-term bias remains slightly bearish or neutral at best. Key horizontal support sits at 96.34. If the DXY can clear the 97.25 mark, it has room to run toward 97.98 and potentially 98.80. However, a break below that rising trendline could see a quick slide back toward 95.50.

Trade Idea: Consider a long position if the price closes above 97.25, targeting 98.00 with a stop loss placed below 96.60 to protect against a trendline break.

GBP/USD Price Outlook: Triangle Consolidation Keeps Traders Guessing

On the 4 hour chart the GBP/USD is stuck near 1.3647 at the moment. Price is still centred inside a narrowing triangle, with a downward sloping trend line and a rising support line that’s been acting as a bit of a magnet for the price. After the bounce from 1.3510, the pair is just kind of stagnating, unable to really make up its mind where it wants to go.

The last few candles have shown tiny little bodies and some pretty small wicks too, which is telling us that the buyers are determined to keep the price above 1.3635 (that’s the 50% fib level by the way) but to be honest, they’re not really showing much conviction. The 50 period moving average is pretty much flat, running right through the price and the 200 period MA is lurking just below at 1.3560.

If we do manage to break above 1.3700 then the first port of call is probably going to be 1.3760, and then maybe 1.3810 after that. But if we drop below that trendline then 1.3580 is looking like a definite possibility.

Trade idea: Go long if we get above 1.3695, target 1.3760 and set your stop loss just below 1.3620.

EUR/USD Price Outlook: Bulls Eye $1.1900 as Trendline Support Holds

On the 4 hour chart, the EUR/USD is hovering around $1.1880, resting right on a major upward trend line that has been the compass for price action since it bounced off that $1.1600 low. But its got a problem – a heavy resistance zone at $1.1893 is staring it right in the face – in recent candles weve seen tiny bodies with huge wicks thats what happens when a price is running out of steam.

The 50 period MA – in red – is pretty much flat at the current price, effectively giving it a talking point where the price will either keep going or reverse. But the long term 200 period MA (blue) is still down at $1.1780 while short term momentum looks decidedly heavy.

If the price manages to stay clear of the trendline and blasts past $1.1900 it could be eyeing $1.1986 next. On the flip side a break below that trendline and the price is heading for $1.1836.

Trade idea: Buy above $1.1905 and shoot for $1.1980 with a stop-loss just below $1.1850