Dollar Eyes Next Move: Can Bulls Regain Control?

The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rebounded modestly following the latest U.S. employment report. US August nonfarm payrolls posted a massive beat at 162K vs 55K expected, holding unemployment flat at 4.1%. Robust labor market data coupled with persistent inflationary pressures have reinforced market expectations that the Federal Reserve may maintain a restrictive policy stance or potentially increase interest rates later this year.

However, the dollar has yet to achieve a decisive breakout to the upside. Anticipation of tighter monetary policy from the European Central Bank and the Bank of Japan continues to support their respective currencies, thereby limiting the greenback’s advance.

What Should Traders Watch?

Trading volumes are expected to be subdued on Monday due to the U.S. holiday and a lack of major economic releases. Nonetheless, geopolitical developments in the Middle East remain a significant source of potential market volatility.

Following the strong employment report, market focus will shift to this week’s Consumer Price Index (CPI) and Producer Price Index (PPI) releases. These inflation figures could materially affect expectations regarding the Federal Reserve’s next policy decision and may trigger renewed volatility across currency markets.

DXY Technical Outlook

The broader trend in the dollar remains mixed, contingent upon buyers defending the 98.50–98.00 support zone. As of this writing, the DXY is trading above 99.00, making price movements around this level particularly critical for the outlook in the coming week.

Traders should watch for reversal or continuation signals near these key levels. A sustained move above 99.50 would reinforce the bullish case and confirm that buyers are regaining control. In this scenario, the next upside targets would be 100.00 and 100.30. Conversely, a break below 98.50—and especially below 98.00—would undermine the bullish structure and increase the risk of a deeper correction.

Bottom Line

Dollar traders should closely monitor the upcoming U.S. inflation data, geopolitical developments, and statements from Federal Reserve policymakers for new insights into monetary policy. From a price-action perspective, the dollar appears to be entering a renewed upswing. Provided the 98.50–98.00 support zone holds, the preferred strategy is to trade in line with the prevailing trend and view pullbacks as potential opportunities to establish long positions.

Warning! This material is not intended as investment advice. Past performance data does not guarantee future returns. Investing in foreign currencies may affect your returns due to their fluctuations. Any transaction in securities may result in both profits and losses. The assumptions and expectations set forth in this material are only estimates that may not be accurate and may change depending on current economic conditions. These statements do not guarantee future returns.