US Dollar Forecast: DXY Drops Ahead of NFP Data – Are GBP/USD and EUR/USD Set to Break Higher?
By Arslan Ali, Published: February 11, 2026, 08:25 GMT
US Dollar Index Edges Lower as Economic Data Disappoints
The US Dollar Index (DXY) declined to around 96.50 on Wednesday, February 11, marking a loss of 0.31% for the trading day. This movement reflects growing market concerns fueled by subdued US economic data and geopolitical uncertainties. Investors are closely monitoring upcoming events, particularly the U.S. Non-Farm Payrolls (NFP) report, which is poised to influence the near-term trajectory of the dollar.
Retail Sales Flatline Dampens Growth Outlook and Fuels Fed Rate Cut Bets
A central factor pressuring the dollar is the stagnation in retail sales. The US Census Bureau revealed that retail sales in December held steady at $735 billion, following a 0.6% increase in November. This lack of upward momentum has led economists to revise downward their forecasts for fourth-quarter economic growth.
The implication for the Federal Reserve’s monetary policy is significant. With these weaker data points, market participants have heightened expectations that the Fed may opt for more aggressive interest rate cuts during 2026 to support economic growth.
Fed Independence Under Scrutiny Amid Political Developments
Adding to the dollar’s woes are concerns surrounding the Federal Reserve’s independence. Recent remarks from former President Donald Trump regarding his Fed Chair nominee, Kevin Warsh, have unsettled markets. Reports suggest potential legal action if the Federal Reserve does not adopt a more accommodative stance on interest rates, igniting fears of political interference.
Federal Reserve Governor Stephen Miran also commented on the practical limits of central bank independence during crises, stating that "absolute, 100% pure independence" is unattainable under extraordinary conditions. Such statements have further amplified bearish sentiment toward the dollar’s prospects.
January Non-Farm Payrolls Report in Focus
Attention is now squarely on the January Non-Farm Payrolls report, which has been delayed due to the recent U.S. government shutdown and is expected today. Economists forecast an addition of 70,000 new jobs for January, a rebound from December’s modest 50,000. The unemployment rate is anticipated to remain steady at 4.4%.
A significant miss—if the payroll figure dips below 40,000—could send the DXY index tumbling further, potentially testing crucial support near 95.55. Conversely, a strong jobs report may stabilize the dollar and impede its decline.
Technical Overview: DXY Tests Key Support Levels Amid Persistent Downtrend
From a technical perspective, the DXY remains below a downward trendline extending from a late January peak. The index has struggled to break resistance between 97.60 and 97.80, sustaining a steady downtrend characterized by bearish price action.
At present, the dollar is testing the 0.236 Fibonacci retracement level at approximately 96.34, which coincides with an ascending trendline from a low near 95.55. A breach below 96.30 support could accelerate selling pressure toward the 96.02 mark or even the 95.55 floor.
On the upside, resistance lies around the 0.382 Fibonacci level at 96.83 and the 0.5 level near 97.22. These are reinforced by the 50-period moving average at roughly 97.20, while the 100-period moving average around 97.98 continues to cap any significant rallies.
Trading Idea: Consider short positions if the DXY slips below 96.30, placing a stop-loss just above 97.20 and targeting 95.55. —
GBP/USD Poised Near Key Resistance as Consolidation Phase Continues
The GBP/USD pair is currently trading near $1.3675 on the 4-hour timeframe, holding just below a descending trendline from a high near $1.3870. Recent price action shows multiple rejection wicks near the $1.3690–$1.3700 range, indicating selling pressure around the 0.382 Fibonacci retracement level at $1.3691. The pair is bobbing between the 0.5 Fibonacci level at $1.3635 and the 0.382 level at $1.3691, creating a narrowing trading range. Short-term support is provided by the 50-period moving average near $1.3650, while the 100-period moving average at approximately $1.3510 aligns with a longer-term ascending trendline, maintaining a constructive medium-term outlook.
A breakout above $1.3700 could open the way for gains toward $1.3760. Conversely, a drop below $1.3635 might expose downside toward $1.3580. Trading Idea: Initiate long positions on a decisive move above $1.3700, with a stop-loss beneath $1.3635 and a profit target around $1.3760. —
EUR/USD Holds Above Breakout Support, Eyeing Further Upside
EUR/USD is positioned near $1.1916 on the 4-hour chart, maintaining levels just above the former resistance zone at $1.1890, now serving as support. The pair exhibits some hesitation, with small-bodied candles and upper shadows around the $1.1930 to $1.1950 area, reflecting caution as it confronts resistance supply ahead.
Underlying technical support includes a rising trendline emanating from mid-January lows near $1.1600, bolstered by the 50-period moving average near $1.1850 and the 100-period moving average around $1.1765. These levels collectively underpin a bullish trend.
A sustained move above $1.1985 may pave the way for a test of $1.2080, while a breakdown below $1.1890 could result in a pullback toward $1.1835. Trading Idea: Consider buying EUR/USD above $1.1950 with a protective stop below $1.1890 and targeting $1.2080. —
Market Outlook
The US dollar faces downward pressure amid sluggish economic indicators and political developments clouding Federal Reserve autonomy. The upcoming Non-Farm Payrolls report will be pivotal for the dollar’s next directional move, potentially impacting major currency pairs like GBP/USD and EUR/USD, both of which are positioning for possible breakouts.
Market participants should watch key technical levels alongside macroeconomic releases to inform trading strategies in this volatile environment.
About the Author
Arslan Ali holds an MBA in Finance and an MPhil in Behavioral Finance. With expertise in financial analysis and investor psychology, he integrates academic insights to interpret market sentiment and identify potential overbought or oversold conditions.
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