The first full week of August has arrived and investors have switched off central bank commentary, and are turning their focus onto economic data and more specifically, on the countrys leading reports of the month .
Here is what is at stake.
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The Numbers to Watch
On Friday, August 7 at 12:30 GMT, the US Bureau of Labor Statistics will be releasing the July employment Situation Report . Expectations are for a rebound on the back of weak number for June .
Metric June Prior July Forecast
Nonfarm Payrolls 57,000 88,000
Unemployment Rate 4.2% 4.2%
Avg Hourly Earnings (YoY) 3.5% 3.3%
For the number of payrolls, the forecast range is between 50,000 and 140,000 but market economists have an estimate of 88,000 . A "Goldilocks-type" number (soft enough to leave the Fed on hold, but strong enough to ward off recession worries) would be sitting somewhere around this level.
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Why This Report matters now
The timing of this report could not have been more acute. As the July 29th FOMC meeting wrapped up with a 9-3 vote to keep rates on hold but three members voting for a rate hike, Fed Chair Kevin Warsh continued to leave the possibility of a September rate hike open .
The labor market is currently the critical piece of data to provide a hint as to what the Fed will do next.
A robust print of payrolls numbers (90K+) would firm the dollar, as the data will likely push the Dollar Index (DXY) up toward a pivotal resistance of 101.92. Fed funds futures prices suggest a 63%-72% likelihood of a September rate hike.
On the other hand, payrolls figures weaker than 70K, could bring about a renewal of expectations of policy easing and may encourage the current bearish move for the Dollar; with analysts warning that if this happens then it can send DXY down to 94 by the end of the year.
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DXY Technical picture
With the Dollar Index (DXY) falling sharply following a failed attempt to drive higher toward the long-term support resistance, technical traders are turning their focus toward a key support zone.
Level type description value
Key resistance 101.92 / 101.98
Immediate Resistance 100.42
Key Support zone 99.30 - 100.30
Critical Support 99.30 (38.2% Fibonacci retracement)
52-week MA / key support 98.95
In the longer term, as long as the Dollar Index (DXY) continues to trade within the above mentioned support zone, the outlook for the 2026 bull market remains. On the other hand, a weekly close of the index below 99.30 could represent a further and more significant move lower.
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What to watch this week
Day Event Date
Monday ISM Manufacturing PMI Monday
Wednesday JOLTS Job openings & ADP employment figures Wednesday
Thursday ISM Services PMI Thursday
Friday Nonfarm Payrolls Friday
This releases will shape the argument leading into the main July employment data.
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What This means to you
This week will be decisive for the direction of the Dollar in August.
If you are Long on USD, the 99.30-100.30 support zone is key and a robust reading of the payrolls data (+90K+) will likely bring DXY up toward 101.92.
If you are short on USD, weak data (below 70K) will more likely bring DXY down toward 98.95 .
ING Opinion: Despite the direct intervention in FX and downward pressure from oil prices, the DXY has managed to hold up. This is likely because market operators are pricing in a September rate hike. Yet, it seems a sustained sell-off has yet to be built for the Dollar.
Key forex pairs to observe are the majors: EUR/USD, GBP/USD and USD/JPY as well as the US Dollar Index (DXY).
Be disciplined and watch the levels. Finally, have all your eyes glued to Friday.
