Created
: 2025.07.03
2025.07.03 21:06
The US Dollar (USD) is treading water on Thursday, trading flat in a tight range as traders turn their focus to the upcoming Nonfarm Payrolls (NFP) report at 12:30 GMT.
With volatility subdued, the US Dollar Index (DXY), which measures the Greenback's value against a basket of six major currencies, is hovering around 96.80 during the European session, as traders adopt a wait-and-see approach ahead of the pivotal US employment data.
The DXY failed to reclaim the 97.00 mark on Wednesday following a weaker-than-expected ADP Employment Change report. The data showed that US private sector employers cut 33,000 jobs in June, falling well short of expectations for a 95,000 increase. The surprise decline raised fresh concerns about the health of the labor market and reinforced dovish Federal Reserve (Fed) expectations, keeping the US Dollar anchored near over three-year lows.
The private jobs report also prompted a shift in interest rate cut bets, with traders now pricing in a 25% chance of a July rate cut, up from 20% a day earlier, according to the CME FedWatch Tool.
Building on this cautious mood, the US Dollar has declined by more than 10% over the past six months. The US Dollar remains vulnerable as broader macroeconomic and policy uncertainties increase pressure. Lingering concerns over the US President Donald Trump's proposed tariffs and an increasingly fragile fiscal situation have dampened investor confidence. The combination of trade policy risks and rising government spending is fueling worries about long-term economic stability, reducing the demand for the Greenback.
The Dollar Index (DXY) recently broke below a descending wedge pattern. After the breakdown, the index is now hovering in a narrow, range-bound phase between roughly 96.40 and 97.15, suggesting a temporary pause in the sell-off. The index is now attempting a mild rebound and appears to be retesting the lower boundary of the broken wedge near 96.80-97.00. This area, which once acted as support, is now acting as resistance. The index is still trading below the 9-day Exponential Moving Average (EMA) at 97.25, reinforcing the bearish setup unless buyers manage to reclaim that level with strong momentum.
Momentum indicators also support the idea of consolidation. The Relative Strength Index (RSI) is sitting near 31.49, indicating weak momentum that is easing slightly from the oversold zone. The Rate of Change (ROC) at -1.98 remains negative, but is flattening out, which aligns with the sideways movement in price. In short, the US Dollar Index is in a range-bound recovery attempt after the breakdown, but without a strong catalyst or bullish follow-through, the risks still lean to the downside. A clean break below 96.60 could resume the downtrend, while a close above 97.25 may hint at short-term stabilization.
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Thu Jul 03, 2025 12:30
Frequency: Monthly
Consensus: 110K
Previous: 139K
Source: US Bureau of Labor Statistics
America's monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve's mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
Created
: 2025.07.03
Last updated
: 2025.07.03
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