U.S. Dollar Index sinks to 6-month low as the Fed awaits key jobs data
The index declined amid the risk of a tariff-related recession
The U.S. Dollar Index (DXY) has erased over 80% of its post-U.S. election-induced gain, dropping to a fresh six-month low near 101. The decline comes as investors assess the risk of a recession linked to tariff policies, while anticipation builds for the upcoming Nonfarm Payrolls (NFP) report, which could shape the Federal Reserve’s next move on interest rates.
The DXY has lost more than 2.8% in the early days of the second quarter, extending its downward trajectory. After briefly recovering to 102.3 during the European session on Friday, April 4, the index resumed its decline and is currently hovering around 101.7. Immediate support stands at 101.50, a level where buyers could step in to slow further losses. As seen on the one-hour chart, on the upside, resistance is reinforced by the 100 EMA near 102.80.
U.S. dollar price dynamics (March - April 2025). Source: Tradingview
Job growth slowdown in March could intensify bearish sentiment for the dollar
Market participants are closely watching Friday’s NFP report for insights into the labor market’s resilience. Economists expect a payroll increase of 135,000 jobs for March, down from February’s 151,000. In addition, the Unemployment Rate is projected to remain at 4.1%, while Average Hourly Earnings growth is forecasted to slow to 3.8% from the previous 4.0%.
Fed Chairman Jerome Powell recently acknowledged heightened uncertainty surrounding policy changes and economic conditions. While he signaled the Fed could ease if labor market conditions deteriorate, he emphasized there is no urgency to cut rates. This positions the NFP data as a potential catalyst in focus for the dollar’s next move.
As the dollar struggles to maintain ground, the 101.50 support level is critical. A break below could accelerate selling pressure, while a rebound may provide short-term relief. If NFP data surprises to the upside, expectations of a prolonged Fed pause could lift the dollar toward the 102.80 resistance. Conversely, weaker employment figures may fuel further declines, reinforcing the bearish outlook for the greenback.
The U.S. Dollar Index dropped 2.1% since April 1st, hitting a 6-month low near 101.50. Trade tensions and weak PMI data triggered the decline, leaving the index near a critical support level.
