Core PCE, Non-Farm Payrolls, and FOMC Loom Large
The US Dollar is entering one of its most pivotal weeks of 2025. Key economic events — including the Core PCE release tomorrow, Friday’s Non-Farm Payrolls (NFP), and next Wednesday’s Federal Open Market Committee (FOMC) rate decision — are set to determine whether the ongoing bearish momentum continues or finally starts to reverse.
The Greenback has struggled in early 2025, extending the downtrend that began just two weeks into the new year. After a strong 2024, the USD’s reversal has been pronounced, with the DXY Index hitting major long-term support around 97.94. This level represents the 38.2% Fibonacci retracement from the 2008–2024 rally and coincides with a key trendline from the July 2023 lows.
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Long-Term Technicals: Critical Support Holding… For Now
Oversold Readings Flash Caution for Bears
From a technical perspective, the USD remains heavily oversold on the weekly chart, a rare setup that doesn’t promise an immediate reversal, but raises the risk of continued short exposure. Historical precedent from August 2024 showed that even after hitting oversold RSI levels, the USD bled lower for several weeks before buyers regained control.
However, with multiple high-impact catalysts on the calendar, including inflation and labor market data, traders should prepare for volatility. A significant move in either direction could shape sentiment for weeks or even months to come.
EUR/USD at the Crossroads: Overbought and Stalled at Resistance
Bulls Struggle Near 1.1500 as Support Levels Below Come Into View
As the Euro comprises 57.6% of the DXY index, its movements are pivotal to the USD’s direction. EUR/USD has been locked in a holding pattern near 1.1400 for the past three weeks, with a brief spike above 1.1500 failing to gain traction.
Like the USD, the Euro is also at technical extremes, with a weekly RSI in overbought territory. If the Euro begins to retrace, the 1.1275 and 1.1200 levels may offer support and could coincide with a short-term USD recovery, especially if US data surprises to the upside. Adding to the tension is Friday’s Eurozone CPI report, which could further shape expectations for ECB policy.
USD/JPY Eyes BoJ Outlook as 140.00 Handle Comes Into Play
Bear Traps Abound, But Trend Remains Fragile
USD/JPY continues to reflect the broader uncertainties around carry trades and Japanese monetary policy. The Bank of Japan meeting on Wednesday could provide fresh direction, though rate hikes remain unlikely due to tariff uncertainty and subdued inflation.
The pair recently revisited the 140.00 level, a major psychological and technical zone, after a strong downtrend since January. Despite the downward pressure, false breakdowns (bear traps) have plagued the trend, suggesting caution for traders expecting a clean move lower. Any shift in BoJ guidance or a surprise in U.S. data could reignite volatility in this sensitive cross.
Canadian Dollar Holds Steady as Investors Weigh U.S. Tariff Signals and Rate Cuts
Donald Trump Hints at 25% Tariffs on Canadian Imports Starting February 1
Could U.S. Tariffs Push the Canadian Dollar to Record Lows? Loonie on the Edge
Canada’s Rising Threat to Cut U.S. Electricity Supply Due to Tariffs
USD/CAD: A Potential Bright Spot for Dollar Bears
Long-Term Range Still in Play, Resistance Near 1.4000
USD/CAD has offered one of the cleanest technical setups for those playing USD weakness. Despite an attempted breakout earlier in 2025, the pair remains trapped in a broader range and has recently stalled near 1.3846, a key level from April 2024.
The past two weekly candles have shown indecision, and this week is shaping up similarly. A pullback toward the 1.3980–1.4000 resistance zone could offer a favorable entry point for short positions, particularly if U.S. data continues to underwhelm.
Conclusion: Time for a Turnaround or More Pain Ahead?
This coming week could be a turning point for the US Dollar. With oversold technicals clashing against pivotal support zones and major data releases, the setup is ripe for high-impact moves.
Whether you’re watching the Euro stall, the Yen react to BoJ guidance, or CAD hold resistance, it’s clear that the US Dollar’s fate hinges on more than just technicals — macro catalysts could fuel the next major shift.