US payrolls increased by 165,000 in October, while unemployment edged down to 4.1%. The data pushed markets back towards a possible Federal Reserve rate rise in December, lifting yields as the dollar index moved above 102. The post-release move reinforced the broader focus on the DXY trend that has been in place since the January low.
On daily charts, the dollar’s advance from January has been characterised by overlapping, choppy moves that point to a corrective structure rather than an impulse. The January-to-July rise is framed as an A-B-C move labelled wave (W), followed by a September pullback marked as wave (X), with the current leg described as wave (Y), another A-B-C sequence. That leaves five swings completed, with two still outstanding, implying scope for another push higher towards the 105 area. Intraday analysis places last week’s dip as a wave 4 pullback into 101 support, with 99.86 flagged as the key level for maintaining the recovery narrative; timing models also track prior January turning points in 2024, 2025 and 2026, with the seventh swing pencilled in for early 2027, alongside the new Congress taking office on 3 January 2027 after Democrats won both the House and Senate.
Dollar Strength and Trading Strategies
Following the stronger-than-expected October jobs report showing 165,000 payrolls added and unemployment slipping to 4.1%, derivative traders should position for continued dollar strength in the coming weeks. Treasury yields have pushed higher as markets price in a tighter Federal Reserve stance, lifting the dollar index cleanly back above 102. We see this momentum as confirmation that short-term dips in the greenback offer favorable entry points for long strategies.
From a structural standpoint, the dollar’s rise from its early 2026 lows is unfolding in a complex corrective pattern that points higher. We are tracking a multi-swing wave count that targets the 105 region on the dollar index in the next phase of this move. As long as price holds above critical support at 99.86, we advise traders to use pullbacks toward support as buying opportunities across foreign exchange futures and options.
Seasonal and Political Timing Considerations
Seasonal timing and political shifts also support this setup as we look toward the end of the year. Dollar trend pivots have repeatedly clustered around January over the past three years, creating a clear seasonal window to monitor. With the recent midterm elections handing control of Congress to Democrats starting January 3, 2027, this political transition provides the fundamental catalyst needed to drive the dollar toward our target.
A firmer dollar does not mean traders should aggressively short equity derivatives, however. Historical market data shows that the S&P 500 has posted positive returns in the 12 months following midterm elections 100% of the time since 1950, averaging a gain of roughly 15%. We recommend maintaining long dollar exposure through currency derivatives while remaining cautious about shorting stock indexes, as both asset classes can comfortably rally together.
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