USD Index drops to 2.5-month low on weak jobs data, Fed uncertainty

The US Dollar Index has declined to near three-month lows around 106.20, pressured by softer-than-expected labor market data that has increased uncertainty over the Federal Reserve's rate trajectory. Recent employment indicators showed job openings falling more than anticipated, while wage growth moderated, suggesting cooling labor market conditions. This data has fueled speculation that the Fed might adopt a more dovish stance in upcoming meetings, with markets now pricing in a 65% probability of a rate cut by March 2025. EUR/USD has benefited from dollar weakness, climbing toward 1.0580 and approaching 12-week highs ahead of Thursday's European Central Bank policy decision. Technical indicators suggest the dollar remains vulnerable, with the DXY testing support at 106.00. A break below this level could accelerate losses toward 105.50, while any recovery faces resistance at 106.80.