The first full trading week of August is here and the narrative among traders is turning from monetary policy shifts back to the economic calendar – specifically the Nonfarm Payrolls release on Friday.
Here’s where we stand.
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The Figures in Question
On Friday, August 7 at 12:30 GMT, the Bureau of Labor Statistics will print the Employment Situation report for July. As the graph above illustrated, expectation is a step up from the poor June report, although that consensus is exceptionally wide.
Data Release
Nonfarm Payrolls 57,000 -60K- 120K
The July estimate for nonfarm employment range extends from a low of 65,000 (Deutsche Bank) to 110,000 (UniCredit). The market consensus fell around 88,000, as evidenced by the tight price action since the beginning of trading August. The outcome of the report this Friday as a result on the collective manner all aspects of the report is likely to determine how markets price interest rates increases going into the back end of year and also determine how and what level of movement DXY will make and also if other global pairs like EURUSD to take part on.
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What's So Important at This Juncture?
In plain terms, the timing of this particular report has arrived at a most crucial phase, immediately following the July 29 Fed Open Market Committee Meeting during which 3 members expressed open discontent, by voting for an instant rate hike while the Chairperson, Kevin Warsh left the meeting uncommitted on future rate plans. The consequence: Fed Funds futures price rate hikes at 63% -73% probability into the month of September and over 85% at year-end. Hence, this impending labour report plays the deciding role in such policy plans.
Favorable numbers greater than 90,000 will confirm the Fed's positive sentiment towards raising interest rates and could trigger a bounce higher in the DXY towards its 101.92 level.
Goldman Sachs caution that unless economic data weakens before the Fed's next meet, markets might 'force the Fed' to implement policy actions to avoid inflation. Should July NFP come in at less than 70K, markets are likely to scale back rate hike expectations and this is probably negative for US interest rates and US dollar prices as well.
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DXY Technical Action
Since reversing from multi-year downtrend resistance with significant downside, the Dollar Index has pivoted lower – but has found an area of interest down on the chart.
The most critical support lies between 99.30 – 100.30 where an confluence with the trend line indicates potential to slow downward price action. As the Dollar index holds above this support zone on weekly charts, we will maintain the belief in the 2026bullish outcome. However if we fail to maintain this zone and break and close on a Weekly closing base below the 99.30 level that would imply more risk of selling going to 98.00.
Key support is 99.49, trendline confluence.
Immediate Resistance at 100.30 - 100.60 and then up to the Key Resistance level of 101.80- 102.00.
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This All Means For You…
For now the long Dollar sell off doesn’t seem to materialize. I don’t think it would take any less than clear evidence the Federal Reserve avoids policy action to allow dollars remain pressured . Thus, Strong data likely support the USD and will cause the index push towards to the upside while on contrary soft data will cause the dollar index sell off aggressively and it can cause to reach to key support and may fall further.
Today the July US ISM Manufacturing PMI came out at their highest point for 4 yrs and added to the strength of dollar .
Geopolitical tension continue , especially over oil rich regions, i dont see these event as a support to dollar.. Stay calm .. Watch these levels . Goodluck on Friday!!!!
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