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US Dollar Forecast: Dollar Weakens Post-NFP on Fiscal and Reserve Status — Can GBP/USD and EUR/USD Hold?
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Key Points:
- DXY dipped to $100.68 with red continuation candles testing triangle breakout level.
- EUR/USD defended $1.1453 blue trendline support with green rejection candles absorbing selling pressure.
- GBP/USD held $1.3289 resistance zone, testing key levels with mixed candles and neutral-to-bullish momentum.
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Currencies Digest NFP Release as Markets Look Ahead
On July 3, the U.S. dollar, euro and pound mirrored markets’ initial reaction to the latest U.S. nonfarm payrolls report for a new gauge of labor-market strength and wage trends in the U.S. The nonfarm report gave markets insights into the Fed’s policy stance, which is weighed against ongoing core inflation; this will influence relative demand for the greenback, as markets price in Fed easing.
The euro struggles against growth divergences in the euro zone and the ECB’s quest for inflation containment. Varying national fiscal stances and inflation rates will drive the single currency. Sterling is challenged by the services inflation risks for the Bank of England versus weaker growth signals and domestic fiscal policy and labor market trends, both factors.
In the foreseeable future, inflation numbers, retail sales data and Fed and ECB comments will put these scenarios to the test. In a larger sense, economic fundamentals are differentiating the three currencies in terms of inflation, growth resilience and fiscal positions, creating two-sided risk.
Current account positions and capital inflows and outflows will continue to be a determinant for exchange rate movement.
DXY Dips to $100.68 – Soft NFP-Driven Sell-off on 4h
The DXY price trades at $100.68 on the 4h time-frame. After the soft NFP report triggered the price rejection at the 50 EMA of $101.07. The sell-off continued as we saw red candles moving lower towards $100.68.
This was followed by a strong downward continuation of bearish lower highs as price moved to breach below the 100 EMA of around $100.78. RSI moved below the 31 level. The failed fair value volume profile area is between $100.52 and 101.06.
The 100.52 level of the ascending blue channel, the floor of the ascending trendline, is being put to the test. Even if the overall trend was in ascending channel trend but the price is decisively in the negative trend since we broke down below the 101.06 level of the ascending blue channel.
The consistent formation of lower highs and lower lows suggests that sellers are in control.
Trade idea: Sell at $100.68, target is 99.50, stop loss is $101.06
EUR/USD Rises to $1.1453 – EMA 50 Defense on 4h
The EUR/USD price trades at $1.1453 on the 4h time-frame. After we saw rejection at the red MA of 1.162 and the rebound candles held onto support as 50 EMA at 1.1419. We saw green candles in a bounce. Buyers were able to absorb the supply at the support level with wicks of bullish candles. The bullish structure continues as we see higher lows forming.
RSI is at a neutral to bullish momentum at 62 level. The strong volume profile cluster pivot area is between 1.143 to 1.150. The 1.155 to 1.162 area will be where to look for resistance to the bullish structure.
Even if the overall trend was in a bearish trend but the price structure is in a neutral-bullish structure as it holds onto the 50 EMA. Higher lows suggests buyers are still in control.
Trade idea: Buy at $1.1453, target is 1.155, stop loss is 1.140
GBP/USD Holds $1.3289 – NFP-Driven Breakout on 4h
The GBP/USD price trades at $1.3289 on the 4h time-frame. After we saw a strong bullish continuation candle as price breached through the solid resistance area between 1.3317. This was triggered as NFP data was released and the price was rejected at 1.337 MA level before the reversal began.
We saw a bullish engulfing continuation in candle formation as the bullish higher highs and higher lows are holding. RSI is in overbought territory at a bullish momentum of 72.
The 1.320 to 1.331 area as the strong volume profile pivot area. The bullish continuation of the higher highs and higher lows is looking for the 1.338 to 1.345 area as the first area to watch. Even though the overall trend was in the sideways trend but the price structure is still in a bullish uptrend with the higher highs and higher lows.
The 1.3317 level of the ascending trendline has held. The consistent formation of higher highs and higher lows suggest that buyers remain firmly in control.
Trade idea: Buy at 1.3289, target is 1.338, stop loss is 1.320
About the Author
Arslan Aliauthor
Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.
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