U.S. Dollar Index weakens as market eyes JOLTS report and Fed policy implications
The index remains under pressure, trading at 103.6
The U.S. Dollar Index (DXY) posted a significant 3.7% decline in Q1 2025, with price action stabilizing at a five-month support level of 102.8 in mid-March.
Despite a brief rebound, the index remains under pressure, trading at 103.6 in the European session on April 1 after reaching a high of 103.8 earlier in the day. The bearish tone in today's session suggests that traders are positioning for further downside.
The dollar’s decline reflects growing concerns over U.S. economic data and monetary policy expectations. The upcoming Job Openings and Labor Turnover Survey (JOLTS) report for February is a key focus for traders, as it will provide insights into labor market strength, an essential factor for Federal Reserve policy decisions. Market consensus expects job openings to decline to 7.63 million, which would reinforce the narrative of a cooling labor market.
At the Federal Reserve’s March policy meeting, officials acknowledged stable unemployment levels and a still-solid labor market. However, any sharp deterioration in job openings could raise expectations of a dovish shift in Fed policy, potentially accelerating the dollar's downside trajectory. Additionally, inflation indicators, particularly Core PCE data, have reinforced speculation that the Fed may ease policy sooner rather than later.
U.S. Dollar price dynamics (Oct 2024 - March 2025). Source: Tradingview
Bearish RSI and resistance at 104.26 to limit DXY rebound
The daily Relative Strength Index (RSI) remains in bearish territory, indicating ongoing downside momentum. Resistance at 104.26, which capped last week’s high, poses an immediate hurdle for any bullish recovery. Further upside is constrained by additional resistance at 105.0, reinforced by the 50-day Exponential Moving Average (EMA). On the downside, a break below 102.8 would mark a new six-month low, increasing the likelihood of deeper declines.
The current sentiment favors further dollar weakness, driven by expectations of a softer labor market and potential Fed policy shifts. However, if JOLTS data surprises to the upside, indicating a stronger-than-expected labor market, it could boost confidence in U.S. economic resilience, leading to a short-term rebound in the dollar. The near-term direction will largely hinge on upcoming labor market data and the market’s interpretation of the Fed’s next moves.
The U.S. Dollar Index (DXY) dropped for a third consecutive day, retreating from a three-week high. The index’s RSI showed signs of weakening as traders awaited upcoming trade policy news.
