US Dollar Forecast: Weak Labor Data and Political Tensions Weigh on USD – GBP/USD and EUR/USD

Market Overview

During Tuesday’s Asian session, the US Dollar Index (DXY) fell further, slipping below the 99.00 mark. The decline followed a mix of weak labor and manufacturing data, dovish Federal Reserve commentary, and rising political uncertainty. Markets are now focused on the upcoming US ISM Services PMI release for a fresh directional cue.

NFP Miss and Higher Jobless Rate Trigger Dollar Pullback

Friday’s Nonfarm Payrolls data showed just 73,000 new jobs in July, well below forecasts of 110,000 and sharply lower than June’s revised 147,000. The unemployment rate rose to 4.2%, matching expectations but signaling cooling in the labor market.

Simultaneously, ISM Manufacturing PMI dropped to 48.0, extending the sector’s contraction for a second month.

Rate Cut Odds Climb as Fed Signals Easing Path

Rate futures now reflect an 84% probability of a 25bps cut in September, with markets pricing in up to 60bps in total cuts by year-end. San Francisco Fed President Mary Daly supported this shift, citing labor market softness and subdued inflation risks as reasons to begin policy easing soon.

Fed Politics and Services PMI in Focus

Investor sentiment was further rattled by the abrupt resignation of Fed Governor Adriana Kugler amid reported internal tensions.

Traders now await the ISM Services PMI, expected at 51.5, for clues on near-term dollar direction.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is respecting an ascending trendline on the 4-hour chart, maintaining a series of higher lows since July 23. After a sharp drop from the 100.25 high, the index has stabilized above the 50-EMA (98.82) and 100-EMA (98.51), both of which now serve as immediate dynamic support.

The bounce from 98.60 coincided with the rising trendline, suggesting buyers are defending key technical levels.

However, upside remains capped below the horizontal resistance at 99.19, with multiple failed attempts to break above that zone. If DXY breaks and closes above 99.19, it could retest 99.68. On the flip side, a drop below 98.60 may trigger a deeper retracement toward 98.14 or 97.64.

GBP/USD Technical Analysis

GBP/USD remains locked within a descending channel on the 4-hour chart, with price action repeatedly failing to close above the upper boundary near 1.3301. The pair has now formed a series of lower highs, and the recent rejection from channel resistance confirms sellers are defending the downtrend.

Both the 50-EMA (1.3327) and 100-EMA (1.3391) are sloping downward, reinforcing bearish momentum. A move back below 1.3223 would open the door toward 1.3144, while any break above 1.3301 would need to clear the EMA cluster to shift the bias.

EUR/USD Technical Forecast

EUR/USD continues to face downward pressure as price stalls beneath a well-defined descending trendline on the 4-hour chart. The rejection near 1.1594 coincided with confluence from the 50-EMA (1.1567) and 100-EMA (1.1603), both of which are now sloping lower and reinforcing the bearish bias.

Despite a sharp recovery from July’s low, the pair has failed to maintain bullish momentum, forming lower highs and showing hesitation near trend resistance. A break below the 1.1516 support could accelerate the decline toward 1.1458 or lower.