US Dollar Forecast: NFP Data to Drive Volatility – GBP/USD and EUR/USD Outlook

Market Overview

The US Dollar Index (DXY) traded below 104.10 on Friday, hovering at a four-month low as concerns over slowing economic momentum and shifting trade policies pressured the currency.

While President Donald Trump announced a temporary suspension of tariffs on Mexico and Canada, markets remain cautious with reciprocal tariffs still set to take effect on April 2.

The uncertainty surrounding trade policy and potential retaliatory measures have added to the dollar’s weakness, particularly against the Canadian dollar and Mexican peso.

US Dollar Faces Pressure from Fed Policy and Inflation Risks

Market participants reacted to comments from Atlanta Fed President Raphael Bostic, who acknowledged economic uncertainty while reiterating the Fed’s 2% inflation target.

Analysts at MUFG Bank suggested that prolonged policy uncertainty and weak consumer confidence may push the Fed to prioritize economic growth over inflation control, which could further weaken the US dollar.

Markets Await NFP Data for Economic Direction

Traders are turning to Friday’s Nonfarm Payrolls (NFP) report for signs of labor market strength. Expectations point to a 160K increase in February, up from 143K in January, but recent labor data has raised concerns.

The ADP employment report showed only 77K new jobs, far below the 140K forecast, while jobless claims unexpectedly dropped to 221K, beating the expected 235K.

The mixed labor data has heightened uncertainty, leaving the dollar and gold markets vulnerable to potential volatility.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $103.85, up 0.02%, but remains under pressure below its pivot point at $104.41. A downward channel continues to define market sentiment, keeping selling pressure intact.

Immediate resistance is seen at $105.18, with a breakout above this level potentially shifting momentum toward $106.00. However, the 50-day EMA at $105.06 and 200-day EMA at $106.38 suggest a broader bearish trend.

On the downside, $103.43 serves as key support, with further declines possibly extending to $102.64.

GBP/USD Technical Analysis

GBP/USD is trading at $1.2904, down 0.01%, as traders assess market conditions ahead of key U.S. economic data. The pair remains above its pivot point at $1.2869, signaling a bullish bias as long as this level holds. An upward trendline continues to support buying momentum, with immediate resistance at $1.2958 and further upside potential toward $1.3041.

On the downside, $1.2777 serves as the first support, with a break below exposing $1.2696. The 50-day EMA at $1.2748 and 200-day EMA at $1.2592 reinforce the broader bullish structure.

Traders should watch for a confirmed breakout above $1.2958 to strengthen the uptrend, while failure to hold $1.2869 could shift momentum downward.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.0833, down 0.02%, as it consolidates ahead of key U.S. economic data. The pair remains above its pivot point at $1.0768, suggesting a bullish bias as long as this level holds. Immediate resistance stands at $1.0908, with a breakout potentially extending gains toward $1.1013.

On the downside, $1.0676 is a key support level, with further declines targeting $1.0558 if selling pressure intensifies. The 50-day EMA at $1.0606 and 200-day EMA at $1.0478 suggest an underlying upward trend, though the momentum remains cautious.

Traders should watch for a sustained move above $1.0908 for confirmation of bullish momentum, while a break below $1.0768 could shift sentiment, exposing the euro to further downside risks.