The US dollar is navigating critical levels against the euro (EUR/USD) and the Swiss franc (USD/CHF) as traders digest recent economic reports and anticipate the upcoming nonfarm payroll (NFP) data. Soft figures from the ISM manufacturing report, GDPNow, and ADP employment growth have bolstered expectations for Federal Reserve rate cuts. Although the ISM services report was relatively positive, the market’s focus remains on weaker data, setting the stage for today’s NFP release. A slight disappointment could push the USD lower, enhancing risk appetite, while significantly soft data could impact Wall Street indices at their record highs or cause a sharp pullback if job numbers exceed expectations.
Market consensus forecasts an unchanged unemployment rate at 3.9%, with an addition of 182,000 jobs (up from 175,000 previously), and a rise in average hourly earnings to 0.3% month-over-month. However, if unemployment hits 4% or higher and job growth falls to 60,000 or below, USD bears may seize the opportunity, particularly if earnings also soften.
EUR/USD Technical Analysis
The recent selloff of the US dollar might have been premature, suggesting potential vulnerability to a rebound unless the NFP data aligns with bearish expectations. On the EUR/USD daily chart, a bearish divergence has emerged, with the pair struggling to break decisively above 1.09.
The 1-hour chart reveals a bullish yet weakening trend, indicating that only a combination of weak job growth, earnings, and higher unemployment might solidify a breakout. Despite this, buying interest on dips persists, supported by high trading volumes. The upper 1-day implied volatility band is around 1.0930, with substantial resistance near 1.0950, which includes the monthly R2 pivot and historical highs. If momentum shifts downward, the first significant support level for bears appears to be around 1.0860.
USD/CHF Technical Analysis
The USD/CHF pair has shown the clearest decline among USD pairs, influenced by the Swiss National Bank’s warning of potential intervention to counter a weaker Swiss franc. Support has been established at the February high and the 38.2% Fibonacci retracement level, with current prices hovering around 0.89. This level is crucial for today’s market movements, with a break below potentially leading to 0.8800, close to the high-volume node and lower 1-week implied volatility band.
A bullish divergence on the 1-hour RSI suggests that strong employment data could prompt a sharp rise in USD/CHF.
As markets brace for the NFP report, the performance of the USD will hinge on whether the data meets or defies expectations, influencing traders’ strategies and market directions in the near term.
