**US Dollar Price Forecast: Gains Ahead of NFP Release; Focus on GBP/USD and EUR/USD**
By Daniel John Grady for FX Empire
The US dollar index (DXY) has demonstrated renewed strength, bolstered by robust data and shifting expectations around the Federal Reserve’s monetary policy. As the forex market heads into a pivotal week, traders are keenly anticipating the Non-Farm Payrolls (NFP) data, understanding its significant impact on currency pairs, notably GBP/USD and EUR/USD. This comprehensive forecast delves into the fundamentals, technical outlook, and near-term scenarios for the dollar, with a focused lens on the top European currencies.
## Recent US Dollar Performance
**Key Drivers**
The dollar’s latest rally finds its roots in a confluence of fundamentally positive factors for the greenback:
– **Moderate risk aversion:** Geopolitical uncertainties and persistent inflation are causing investors to seek safety, often prioritizing the US dollar as a secure-haven asset.
– **Resilient economic data:** Recent figures such as better-than-expected Manufacturing and Services PMIs, higher consumer spending, and wage gains support the case for a robust US economy.
– **Central bank divergence:** The Fed’s continued data-dependent approach and reluctance to signal imminent rate cuts contrast with more dovish signals from the European Central Bank (ECB) and Bank of England (BoE).
The DXY has stepped away from multi-month lows, climbing above 105.00. Investors are recalibrating rate-cut expectations as the Fed emphasizes its commitment to containing inflation and maintaining a flexible outlook for the rest of 2024.
## The Importance of This Week’s Data
**Why the NFP Matters**
The Non-Farm Payrolls (NFP) report remains the most closely watched labor dataset each month. Its outcome has the power to recalibrate rate expectations and, by extension, influence currency flows worldwide.
– **Stronger-than-expected NFP:** Reinforces Fed hawkishness, supports yields, and typically underpins the dollar.
– **Weaker results:** Would revive the probability of rate cuts, softening the dollar.
Market consensus anticipates the NFP print to remain above 180,000, but traders recall that June’s surprise upside in labor markets resulted in a sharp dollar move. Similarly, wage growth and unemployment rates within the data will add layers to market reaction.
**ISM Services and JOLTS**
Before the NFP release, the ISM Services PMI and JOLTS (Job Openings and Labor Turnover Survey) will flavor the market narrative. Both are seen as forward-looking labor indicators and will be watched for early clues on hiring trends and economic resilience.
## Technical Outlook: US Dollar Index (DXY)
**Key Levels to Watch**
– **Resistance:** Initial technical barriers cluster around 105.30 and 105.90. Further upside could open a retest of the 106.50 area, which capped several rebounds over recent months.
– **Support:** On dips, 104.30 and 103.80 provide notable checkpoints for bulls. A decisive move below these reveals the 103.00 region as the next strong support.
The DXY daily chart suggests upward momentum, with the 50-day moving average curving higher. RSI readings highlight an approach toward overbought territory, implying potential for a pause or pullback after such a rapid ascent.
## EUR/USD: Outlook and Analysis
**Euro Struggles Against a Strong US Dollar**
The euro has witnessed renewed selling pressure over recent sessions. Weak European inflation readings and subdued economic sentiment data have fueled speculation that the ECB will stay dovish for longer.
### Fundamental Backdrop
– **Soft Eurozone Inflation:** Recent CPI data showed inflation cooling more than expected, diminishing the odds of a near-term policy adjustment.
– **German economic struggles:** The eurozone’s powerhouse reported stagnant growth, adding headwinds for a broader regional recovery.
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