US Dollar Awaits July NFP as EUR/USD Eyes 1.1600 Breakout

The US Dollar trades near 100.00 on the DXY ahead of Friday's July Nonfarm Payrolls report, as softer economic data has reduced expectations for another Fed rate increase, leaving EUR/USD and GBP/USD testing key resistance.

"Analysts at Deutsche Bank said in a report that ECB September hike pricing stands at around 90 percent, a divergence from the Fed's pause that has supported the euro against the dollar."

The US JOLTS Job Openings data for June is due at 14:00 GMT, with employers expected to have posted 7.45 million fresh jobs, slightly lower than 7.594 million in May. EUR/USD trades cautiously around 1.1500, holding above the 20-period EMA at 1.1451, with the RSI at 59.1. Immediate resistance aligns at 1.1555, with the next hurdle at 1.1600.

A weaker-than-expected jobs report would likely weaken the US Dollar further and strengthen EUR/USD and GBP/USD, while a stronger report could reverse recent losses and renew rate-hike speculation. This can cause significant movement across forex, equity, and bond markets.

Rate Differentials Favor the Euro

The Fed suspended delivering forward guidance on interest rates from its June policy meeting, a shift that has left markets without a clear anchor for the policy path. The ECB, by contrast, has signaled continued tightening, with Deutsche Bank estimating a 90 percent probability of a September hike. This divergence in policy trajectories has narrowed the rate differential between the euro area and the United States, supporting the single currency.

EUR/USD's technical setup reflects this dynamic. The pair holds a modest bullish near-term bias as price advances above the 20-period EMA at 1.1451, suggesting underlying demand after reclaiming that short-term trend reference. The RSI at 59.1 stays below overbought territory yet leans higher, hinting that buying pressure remains constructive while not stretched. A decisive break above 1.1600 would open the path toward the May 29 high at 1.1686, a level not tested since late spring.

GBP/USD is similarly positioned, trading above its key short-term support as markets weigh the Bank of England's policy path against the Fed's pause. Sterling has drawn support from the expectation that UK inflation remains stickier than in the United States, keeping the BoE on a tightening trajectory even as the Fed steps back.

What a Strong or Weak NFP Means for the Dollar

On the topside, immediate resistance aligns with the downward-sloping trend-line break level at 1.1555, which caps further gains and marks the next hurdle of 1.1600 for bulls. Above that, the pair would extend its upside journey toward the May 29 high at 1.1686. On the downside, initial support is provided by the 20-period EMA at 1.1451; a daily close back below this floor would weaken the current positive tone and expose the pair to the July 28 high at 1.1353.

The July NFP report is the week's most important economic release, and its impact on the Fed's monetary policy outlook will be significant given the central bank's decision to suspend forward guidance. A print below consensus would likely cement expectations of a prolonged pause, pushing the dollar lower across major pairs. A stronger report, however, could revive rate-hike speculation and reverse the dollar's recent losses.

The stakes extend beyond the currency market. A weak jobs number would reinforce the narrative that the US economy is cooling, potentially weighing on Treasury yields and equity indices as investors price in a more dovish Fed. Conversely, a strong print would lift yields and support the dollar, pressuring gold and emerging-market currencies. With the Fed having removed forward guidance, Friday's data will serve as the primary input for rate expectations heading into the September meeting.

This article is for informational purposes only and does not constitute investment advice.