07 Feb 2025

The US Dollar Index (DXY), which measures the value of the US Dollar against six prominent currencies, is currently trading at 107.65 as of Friday. This figure reflects a slight decline in anticipation of the January Nonfarm Payrolls (NFP) report. Analysts predict a significantly lower outcome, considering recent economic indicators that suggest a slowdown or stabilization in the labor market. A notably poor Nonfarm Payrolls figure could raise expectations for more than two interest rate reductions by the Federal Reserve (Fed) in 2025.

Forecasts for the Nonfarm Payrolls data indicate the addition of 170,000 jobs for the month, a decrease from December's 256,000. The projected range varies from a minimum of 105,000 to a maximum of 240,000. Should the actual figure fall below 105,000, it is likely to lead to considerable weakness in the US Dollar (USD) and may result in the DXY dropping below 107.00.

The US Dollar Index (DXY) currently finds itself in a challenging position. The recent tariff measures enacted by US President Donald Trump do not appear to be exerting the same influence on the Greenback as they did in March 2018, when the initial tariffs on China were introduced. Instead, market participants are focusing on the decline in US yields and the emerging economic data that suggests the possibility of more than two interest rate reductions by the Federal Reserve this year. Should the Non-Farm Payroll (NFP) report released this Friday show significantly weaker results, it is anticipated that the markets will begin to factor in three interest rate cuts by the Fed for 2025, potentially driving the DXY down to 106.00.

On the upside, the initial resistance level at 109.30, which corresponds to the high from July 14, 2022, and a rising trendline, was briefly exceeded but could not be maintained on Monday. If this level is regained, the subsequent target before further advancement would be 110.79, the high recorded on September 7, 2022.

Conversely, the high of 107.35 from October 3, 2023, continues to serve as a support level, while the Relative Strength Index (RSI) has utilized the relatively stable conditions of the past three days to consolidate, allowing for additional downward movement that could further depress the DXY. Therefore, one should monitor 106.52, the high from April 16, 2024, or even 105.98, which represents resistance from June 2024 and the 100-day Simple Moving Average, as more reliable support levels.