Article Outline:

• Key Events: Non-Farm Payrolls, Upcoming Inflation Data, and Fed Rate Expectations
• Technical Analysis: DXY, EURUSD (3-Day Time Frames)
• Technical Analysis (TA) Tip: Forecasting with Fibonacci Tools

NFP Outlook

The ADP Non-Farm Employment Change, often an early indicator for Friday’s non-farm payroll data, showed a drop to 122K from the previous 146K and the expected 139K. Friday’s non-farm payroll data is expected to drop from 227k towards 164k. This has temporarily halted the dollar’s rally below the 109.53 high recorded on January 2.
With the Federal Reserve maintaining a more restrictive policy stance in 2025, alongside trade war risks and Trump’s presidency, the DXY remains on a bullish trajectory.

Fed Rate Expectations

Source: CME Fed Watch Tool

The current probability of a rate hold is at 93%, though this may shift following today’s non-farm payroll data and next week’s Consumer Price Inflation report. The FOMC announcement week coincides with Trump’s return to the White House this month, adding to broader market volatility risks in the final week of January.

Technical Analysis: Quantifying Uncertainties

DXY Analysis: 3 Day Time Frame – Log Scale

Source: Tradingview

The momentum of the U.S. Dollar Index remains bullish, with the current 109.53 resistance having the potential to extend further towards the critical 110.30 level.
Support levels at 107.50 and 106 are expected to cushion any declines from current highs, easing the euro’s extreme bearish pressures.

EURUSD Analysis: 3Day Time Frame – Log Scale

Source: Tradingview

The EUR/USD is currently holding support near the 0.618 Fibonacci retracement level of the uptrend from 2022 (0.9530) to 2023 (1.1270) and the 1.272 extension level of the corrective trend between the 2023 high (1.1270), 2023 low (1.05), and 2024 high (1.12).

Both the 0.618 retracement level and the 1.272 extension are significant support/resistance levels, increasing the likelihood of a potential rebound from the current low of 1.0224. If a reversal holds, the next levels to watch are 1.0430, 1.0620, and 1.07.

On the downside, a break below the 1.02 support could extend the drop towards parity, with further potential support at 0.9950 (1.618 Fibonacci extension and 0.786 Fibonacci retracement) and 0.98.

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Written by Razan Hilal, CMT

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