At the moment, the U.S. Dollar Index appears to be moving ahead of this week’s key U.S. labour market data. In simple terms, the market seems to be anticipating strong employment numbers before they are officially released.
If the current price action continues and we do get positive labour data later this week, it would support the Federal Reserve’s earlier position of “wait and see” when it comes to future interest rate cuts. Strong labour data reduces the urgency for the Fed to cut rates, which could lead investors to scale back expectations for interest rate cuts this year.
When you combine that with the fact that the U.S. still offers higher real yields compared to many other economies, the result could be a stronger U.S. dollar, especially as we move into the first quarter of 2026.
From a price action perspective, the London session has now confirmed bullish momentum on the Dollar Index. This move followed an earlier upside shift that took place during the New York session yesterday, suggesting that buyers are stepping in with conviction.
If this upside momentum holds through the end of the week, the next logical phase would be pullbacks or retracements on the Dollar Index. In the short to medium term, continued dollar strength would likely put downward pressure on major currencies such as the British Pound and the Euro.
That said, my personal bias has not fully changed yet. I am still in a wait-and-see mode. I currently hold a bearish to neutral view on the dollar and remain technically bullish on both the pound and the euro overall.
Earlier this week, I mentioned that I was looking for buying opportunities on the pound and the euro against the dollar. However, I have not taken any trades because the one-hour confirmation signals I rely on never materialized.
As of today, Wednesday, I am still staying patient and sitting on my hands. There have been no clear follow-through confirmations on the euro or the pound that align with my trading plan, and until that happens, discipline comes first.
#SOGCAPITAL
