FX Markets Reawaken as NFP Ends Holiday Lull

EUR/USD – Bearish Divergence and Returning Volume Put 1.1700 in Focus

The dollar started 2026 on the right foot, inching towards 1.1700 against the euro, while the US Dollar Index (DXY) climbed to 98.43 during the first trading day of the year. The US Dollar performed poorly in 2025, declining by more than 9%, which is the harshest drop since 2017.

There were many factors contributing to the dollar’s drop in 2025, including the sweeping Trump tariffs, which ignited the trade war, and the constant pressure on the Fed to cut the interest rate further. This last part brought into question the Federal Reserve’s independence and triggered speculation about who will take the reins of the Fed when Jerome Powell steps down in May.

Price action has been greatly influenced by end-of-year volatility and by the lack of major data releases, but this week, all that changes. Trading volumes are likely to return to normal, and the Non-Farm Payrolls (NFP) report will offer some much-needed clarity about the jobs market.

Economic Calendar Highlights

The week kicks off with the release of the U.S. Manufacturing PMI, scheduled for Monday at 3:00 pm GMT. It will be followed on Wednesday at 1:15 pm GMT by the release of the ADP Non-Farm Employment Change, a report that tries to mimic the government-issued NFP that comes out later in the week. The Services PMI comes out the same day, on Wednesday at 3:00 pm GMT.

The main event of the week will be the release of the Non-Farm Employment Change, aka Non-Farm Payrolls (NFP) report, scheduled for Friday at 1:30 pm GMT. This is the main gauge of the health of the jobs market and has a significant impact on interest rate decisions. Currently, there’s a 44% chance of a rate cut in March, according to the CME FedWatch tool, but lower jobs numbers could send that percentage higher. The Average Hourly Earnings and the Unemployment Rate will be released together with the NFP, offering additional insight into the state of the labor market.

Technical Outlook – EUR/USD

The pair has been climbing since early November 2025, but now it is showing bearish signs. The RSI has already printed a double top while the price made a higher high, which is a weak form of bearish divergence. Although it’s not the strongest divergence, it can still generate enough fuel for a drop below 1.1700, especially considering that the entire climb has been slow and without conviction.

If the dollar bulls can take the pair below 1.1700 support and close a daily candle there, the next destination will likely be 1.1600. Before it gets there, the pair may find support at the lower Bollinger band. However, keep in mind that the data released this week will likely generate the next direction, overshadowing the technical aspect.