This is the first full trading week of August, investors are now turning their gaze away from central bank policy announcements, towards a series of major data releases. Leading the pack,Friday's Nonfarms Payrolls report.
Here's a breakdown of the Stakes
The July Employment Situation report from the US Bureau of Labor Statistics is scheduled for release on Friday, August 7 at 12:30 GMT, with consensus estimates pointing to a strong recovery following a dismal June print.
Metric June (Prior) July (Forecast)
Nonfarm Payrolls 57,000 88,000
Unemployment Rate 4.2% 4.2%
Avg Hourly Earnings (Y/Y) 3.5% 3.3%
The median forecast for Nonfarm Payrolls is 88,000, with estimates generally ranging between 50,000 and 140,000. The actual range, according to some sources, suggests a median closer to 91,000.
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Why it's So Important Right Now
The release comes at a critical time. Following last week's unusual 9-3 split decision from the FOMC meeting on July 29 which featured three hawks arguing for a rate hike at that meeting, and Federal Reserve Chairman Kevin Warsh leaving the door open for a rate move in September, the labor market data has been earmarked as the decisive factor by many.
Market expectations are currently priced at 64-74% probability for a September Fed Funds rate hike, a figure directly tied to the imminent labor market data.
Strong payrolls data above 90k will solidify the Federal Reserve's hawkish stance in the eyes of the market, and a failure by the data to falter could mean that continued economic weakness could force the Fed to take an increasingly hawkish approach in an attempt to stave off inflation; Goldman Sachs specifically noted that unless the data begins to fade prior to September, a Fed hike is likely and a robust report will probably send the dollar index (DXY) flying back toward resistance levels found near 101.92.
Conversely, a payrolls reading below 70K, coupled with an increase in unemployment or negative revisions to previous figures, could lead to a dramatic sell-off of the dollar as traders scale back expectations for a September rate hike.
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DXY Technical Setup
The dollar index has plunged dramatically following its failed attempt to breach long-term downtrend resistance, focusing traders' attention on the support zone below:
Level Type Value
Key resistance 101.92 / 101.98
Nearest resistance 100.20 / 100.50
Key support zone 99.30 / 100.30
Important support 99.30 (38.2% Fibonacci level)
Weekly support at 52 week MA 98.95
The 2026 bullish case will largely remain intact as long as the Dollar Index stays above the 99.30 / 100.30 support zone, but a breakdown below 99.30 will see it push back toward 98.95 before potentially accelerating down toward the 98.60 / 98.00 area.
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The Week Ahead
Day Release
Monday ISM Manufacturing PMI
Wednesday JOLTS Job Openings andADP Employment
Thursday ISM Services PMI
Friday Nonfarm Payrolls
All these scheduled releases will provide further clues about labor market health and economic performance going into Friday's main event. With a relatively quiet economic calendar on the UK side this week, the GBP/USD exchange rate will remain primarily tied to US economic figures.
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What Does This Mean for You?
A sustained drop in the dollar has not yet been cemented. Unless the Fed makes it clear it can continue without raising rates, the US dollar is expected to remain bid.
Good data: Bullish for USD. Expect Dollar Index to move toward resistance at 101.92.
Bad data: Bearish for USD. Dollar Index may fall toward support at 98.95.
Maintain discipline, monitor the price levels closely and keep a keen eye on Friday's jobs report.
