US Dollar Weakens After NFP as EUR/USD and GBP/USD Test Key Levels

What to Know

• The U.S. dollar, euro and pound reacted on July 3 to the latest U.S. nonfarm payrolls data as markets assessed labor market strength and wage trends.
• The Dollar Index traded at 100.68 on the 4h time frame after rejection near the 50 EMA at 101.07.
• DXY moved below the 100 EMA around 100.78, with RSI slipping below the 31 level.
• Technical traders are watching the 100.52 level, described as the floor of the ascending blue channel.
• EUR/USD traded at 1.1453 on the 4h time frame after holding the 50 EMA at 1.1419.
• EUR/USD RSI stood at 62, with a volume profile cluster pivot area between 1.143 and 1.150.
• GBP/USD traded at 1.3289 on the 4h time frame after a post-NFP breakout attempt and a rejection near the 1.337 MA level.
• GBP/USD RSI reached 72, placing momentum in overbought territory while buyers continued to defend a higher high and higher low structure.
• Market participants are watching incoming inflation data, retail sales figures and central bank commentary from the Fed and ECB for confirmation of the next directional move.

Dollar Softens as Traders Reprice the Fed Path

The U.S. dollar weakened after the latest nonfarm payrolls release as currency markets weighed whether labor market conditions and wage trends could influence the Federal Reserve’s policy stance. The reaction placed the Dollar Index under pressure, with DXY trading at 100.68 on the 4h time frame after sellers forced a rejection around the 50 EMA at 101.07.

The post-NFP move matters because employment data remains a central input for interest rate expectations. A softer reading can encourage markets to price in a more accommodative policy path, while a stronger reading can reinforce the case for the Federal Reserve to maintain a restrictive stance. In this case, traders responded by reducing dollar exposure as the index lost technical ground and moved through nearby support zones.

Inflation remains the counterweight. The labor market may point toward easing pressure, but ongoing core inflation continues to complicate the outlook for policymakers. As a result, the dollar’s path is not being driven by jobs data alone. Instead, market participants are balancing labor trends, wage pressure, inflation persistence and the timing of potential Fed easing.

DXY Tests the Lower Edge of Its Channel

On the 4h chart, DXY’s move to 100.68 followed a rejection at the 50 EMA at 101.07. Technical traders noted that red candles extended lower as the index moved toward 100.68 and then breached below the 100 EMA around 100.78. That shift weakened the prior ascending structure and put more focus on the next downside support area.

The failed fair value volume profile area sits between 100.52 and 101.06. That zone is important because price action has moved through it with bearish follow through, and the 100.52 level is being tested as the floor of the ascending blue channel. Although the broader structure had been moving within an ascending channel, the breakdown below 101.06 has given sellers a stronger short term advantage.

Momentum also supports the cautious dollar view. RSI moved below the 31 level, pointing to heavy downside pressure on the 4h time frame. While oversold conditions can eventually invite a rebound, the consistent formation of lower highs and lower lows suggests that sellers remain in control unless the index can reclaim the upper side of the failed area.

Some chart watchers continue to frame a bearish DXY setup around a sell level at 100.68, with a target at 99.50 and a stop loss at 101.06. That structure reflects the view that the break below the channel area could continue if buyers fail to defend 100.52. However, any recovery above 101.06 would challenge the immediate bearish reading and could force short term traders to reassess.

EUR/USD Holds Support as Buyers Defend the 50 EMA

EUR/USD traded at 1.1453 on the 4h time frame, showing resilience after holding support near the 50 EMA at 1.1419. The pair had previously faced rejection near the red MA at 1.162, but the pullback did not develop into a deeper breakdown. Instead, bullish candles showed buyers absorbing supply near support, with wicks indicating demand around the lower area.

The pair’s current structure is mixed but constructive. The broader trend had been described as bearish, yet the near term price structure has shifted toward neutral bullish as EUR/USD continues to hold the 50 EMA. The formation of higher lows gives buyers a platform, and RSI at 62 points to neutral to bullish momentum rather than exhaustion.

The volume profile cluster pivot area between 1.143 and 1.150 remains central for traders. Holding within or above that area could keep the pair supported, while a loss of the lower end may reduce confidence in the bounce. Resistance is expected in the 1.155 to 1.162 area, where traders may look for signs of supply returning to the market.

From a macro perspective, the euro still faces challenges from growth divergence across the euro zone and the European Central Bank’s effort to contain inflation. Varying national fiscal stances and inflation rates can create uneven pressure on the single currency. These forces make the euro vulnerable to shifts in expectations, even when the technical picture appears supportive in the near term.

Some technical traders are watching a EUR/USD buy idea at 1.1453, with a target at 1.155 and a stop loss at 1.140. The rationale is based on the defense of the 50 EMA, higher lows and the ability of buyers to absorb selling pressure near support. The trade idea remains dependent on EUR/USD continuing to hold above the lower support region.

GBP/USD Remains Supported After NFP Breakout Attempt

GBP/USD traded at 1.3289 on the 4h time frame after a strong bullish continuation candle appeared around the NFP release. The move included a breach through a resistance area near 1.3317, followed by rejection at the 1.337 MA level before a reversal began. Despite that rejection, the broader short term structure continues to show higher highs and higher lows.

Momentum has been strong. RSI reached 72, placing GBP/USD in overbought territory. Overbought readings do not automatically mean a trend will reverse, but they do indicate that traders should be alert to pullbacks, consolidation or profit taking. In a strong trend, overbought momentum can persist, especially when buyers continue defending higher lows.

The 1.320 to 1.331 area is viewed as a strong volume profile pivot zone. As long as price remains supported around that range, bullish traders may continue to look toward the 1.338 to 1.345 area as the first resistance region to watch. The 1.3317 ascending trendline level has held, reinforcing the idea that buyers are still active despite short term volatility.

Sterling’s fundamental backdrop remains complicated. The Bank of England faces services inflation risks, while weaker growth signals, domestic fiscal policy and labor market trends create competing pressures. That mix can leave GBP/USD sensitive to both U.K. data and U.S. dollar repricing, especially after major labor market releases.

Some market participants continue to frame GBP/USD through a buy idea at 1.3289, with a target at 1.338 and a stop loss at 1.320. The setup depends on the continuation of higher highs and higher lows. A sustained move below the pivot area would weaken the bullish case, while a push into the 1.338 to 1.345 zone would test whether buyers can extend momentum beyond the post-NFP impulse.

Macro Divergence Keeps FX Risks Two Sided

The dollar, euro and pound are being separated by differences in inflation, growth resilience, fiscal positioning and central bank outlooks. These divergences can produce two sided risk because currency pairs do not move on one economy alone. EUR/USD and GBP/USD reflect the balance between U.S. developments and conditions in the euro zone and the United Kingdom.

For the dollar, the key question is whether labor data and inflation readings support expectations for Fed easing. For the euro, growth divergence and inflation containment remain central. For the pound, the tension between services inflation and weaker growth signals continues to shape expectations for the Bank of England.

Current account positions and capital inflows and outflows will also continue to influence exchange rate movement. When investors seek higher returns, safer assets or stronger growth opportunities, cross border capital flows can amplify currency trends. In the current environment, that means technical levels may matter even more when they align with broader policy and growth expectations.

What Traders Are Watching Next

Markets are now looking toward inflation numbers, retail sales data and comments from the Federal Reserve and European Central Bank. These events could test whether the post-NFP dollar weakness has staying power or whether DXY can stabilize near its channel support.

For DXY, the focus is the 100.52 to 101.06 area and whether price can reclaim lost ground. For EUR/USD, traders are watching whether the pair can hold the 1.143 to 1.150 pivot area and make progress toward 1.155 to 1.162. For GBP/USD, the 1.320 to 1.331 zone remains important, with upside attention on 1.338 to 1.345.

The near term picture favors active technical trading rather than a simple directional conclusion. Dollar bears have momentum after the NFP reaction, but EUR/USD and GBP/USD still face resistance overhead. If incoming data changes the outlook for inflation or central bank policy, the same levels now acting as support or resistance could quickly become decision points for a new trend.

Frequently Asked Questions (FAQs)

Why did the U.S. dollar weaken after the NFP release?

The dollar weakened as traders assessed the latest nonfarm payrolls data for signs of labor market strength and wage trends. The reaction encouraged markets to reconsider the Federal Reserve policy path and the potential timing of easing.

Where is the Dollar Index trading now?

The Dollar Index traded at 100.68 on the 4h time frame after rejecting near the 50 EMA at 101.07 and moving below the 100 EMA around 100.78.

What is the key DXY support level to watch?

Technical traders are watching 100.52, described as the floor of the ascending blue channel. A failure to hold that level would keep attention on downside risk, while a recovery above 101.06 would challenge the bearish setup.

What is the current EUR/USD technical picture?

EUR/USD traded at 1.1453 after holding the 50 EMA at 1.1419. The pair has formed higher lows, and RSI at 62 points to neutral to bullish momentum on the 4h time frame.

Where is EUR/USD resistance?

The 1.155 to 1.162 area is the resistance zone being watched by technical traders. The volume profile cluster pivot area between 1.143 and 1.150 remains important for near term support.

What is the current GBP/USD technical picture?

GBP/USD traded at 1.3289 after a post-NFP bullish continuation move. The pair continues to show higher highs and higher lows, although RSI at 72 indicates overbought momentum.

What levels matter most for GBP/USD?

The 1.320 to 1.331 area is viewed as a strong volume profile pivot zone. Upside attention is on the 1.338 to 1.345 area if buyers maintain control.

What upcoming events could affect these currency pairs?

Inflation numbers, retail sales data and comments from the Federal Reserve and European Central Bank could all influence expectations for policy and drive the next move in DXY, EUR/USD and GBP/USD.

Is this a confirmed trend reversal for the dollar?

Not necessarily. The dollar has weakened on the 4h structure, but traders still need confirmation from follow through below support or a failed recovery near resistance before treating the move as a broader reversal.

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