Dollar Weaken on High Unemployment Rate

• The Dollar index weights on soft U.S. job data and edge lower. 

• Japanese Yen boosted by improved earning growth. 

• BTC erased most of its gain from last Friday and continued to trade with strong downside pressure. 

Market Summary

Last Friday's U.S. employment report delivered a mixed bag of results: Nonfarm Payrolls (NFP) surpassed expectations at 206,000 new jobs added, yet the unemployment rate climbed to 4.1%, its highest since 2021. The Dollar Index (DXY) initially fluctuated on the news but ultimately trended lower as markets absorbed the data. With earnings growth showing signs of cooling, anticipation mounts for a potential shift in the Federal Reserve's current tightening stance, especially ahead of Fed Chair Jerome Powell's testimony before the Senate this Tuesday.

Meanwhile, the euro faced headwinds stemming from political uncertainty in France, where Emmanuel Macron's allies unexpectedly secured victory, raising concerns among investors about the impact of left-wing policies on the euro's strength. Conversely, the Japanese Yen strengthened on improved earnings growth data, heightening expectations of a forthcoming rate hike by the Bank of Japan, scheduled for the end of July.

In commodities, gold surged to a monthly high, surpassing $2,380, fueled by speculation of a dovish turn in Fed policy. However, Bitcoin (BTC) continued its bearish trajectory despite a technical rebound, as selling pressure persisted from the ongoing BTC repayment scheme initiated by the defunct Mt. Gox exchange.

Current rate hike bets on 31st July Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (93.3%) VS -25 bps (6.7%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index slid to its lowest level in a week following the release of crucial job data last Friday. Although Nonfarm Payrolls (NFP) exceeded market expectations at 206k, the unemployment rate rose to its highest level since 2021 at 4.1%, and wage growth is cooling. These factors have led the market to anticipate that the Federal Reserve might proceed with rate cut moves. Jerome Powell, the Fed Chair, is set to testify before the Senate on Tuesday and is expected to provide insights into the central bank's upcoming monetary policy decisions, which will likely impact the dollar's strength.

The Dollar index broke below its crucial liquidity zone at near 105.15, suggesting a bearish signal for the index. The RSI has broken into the oversold zone, while the MACD edged lower after breaking below the zero line, suggesting that bearish momentum is gaining. 

Resistance level: 105.15, 105.50

Support level: 104.75, 104.40

XAU/USD, H4

Gold prices rose by nearly 1.5% last Friday, reaching their highest level since early June. The primary driver for this increase was the softening of the dollar, influenced by the mixed U.S. job data. Additionally, gold is being buoyed by political uncertainty in France, where a far-left coalition is poised to win the legislative election. However, the People's Bank of China has paused its gold buying for a second consecutive month, which could affect gold demand and prices moving forward.

Gold prices rose sharply to their resistance level at $2385, suggesting a bullish signal for gold. The RSI broke into the overbought zone, while the MACD continued to gain above the zero line, suggesting that gold's buying power is gaining. 

Resistance level: 2410.00, 2430.00

Support level: 2370.00, 2335.00

GBP/USD，H4

The GBP/USD pair continued its rally after breaking above the uptrend channel, reaching its highest level in July. The pair's rise was primarily driven by a softened dollar following disappointing U.S. jobs data. Additionally, the U.K. election result aligned with market expectations, with the Labour Party seen as an advocate of far-right policies, potentially further strengthening the Sterling.

The GBP/USD pair poised at its elevated level awaiting strong bullish momentum suggests a bullish bias for the pair. The RSI remains in the overbought zone while the MACD continues to edge higher, suggesting the pair remain trading with strong bullish momentum. 

Resistance level: 1.2850, 1.2940

Support level: 1.2760, 1.2660

EUR/USD，H4

The EUR/USD pair seesawed at the beginning of the week as the market digested the results of the French legislative election. The initial projections from Sunday's vote show that Incumbent President Emmanuel Macron and his allies won, which contrasts with last week's first legislative vote. This has added to the political uncertainty in the country, thereby weakening the euro.

EUR/USD remains trading within its uptrend trajectory despite a slight retracement. The RSI remain flowing closely toward the overbought zone while the MACD continues to move upward, suggesting the bullish momentum remains intact with the pair. 

Resistance level: 1.0853, 1.0900

Support level: 1.0767, 1.0735

Dow Jones  (US30), H4

The Dow remains confined within its price consolidation range, lagging behind its peers that have been reaching new highs. U.S. equity markets were buoyed by the downbeat job data released last Friday, suggesting the Fed may soon pivot from its current monetary tightening policy. If Fed Chair Jerome Powell delivers a dovish testimony on Tuesday at the Senate, it could serve as a catalyst for the Dow to break out of its current consolidation range.

The Dow remains below its resistance level at 39450; a break from such a level may be a bullish signal for the index. The RSI is flowing flat at near 50, while the MACD has been hovering above the zero line, which gives a neutral signal for the index. 

Resistance level: 39450.00, 39800.00

Support level: 39070.00, 38800.00

USD/JPY, H4

The Japanese Yen has been strengthening since last week, with the USD/JPY pair currently testing its support level at 160.50. The dollar's strength eased following the release of disappointing U.S. job data last Friday. Meanwhile, improving Japanese wage growth could bolster the Bank of Japan's confidence in making a hawkish move at its upcoming interest rate decision later this month.

USD/JPY continues to edge lower and is breaking its support level at 160.50. A break below this level suggests a bearish signal for the par. The RSI is on the brink of breaking into the oversold zone, while the MACD has broken below the zero line, suggesting that bearish momentum is gaining. 

Resistance level: 161.20, 161.95

Support level: 159.90, 159.40

CL OIL, H4

Oil prices are holding steady above the $83.00 level, awaiting a catalyst to break higher. The market anticipates that Hurricane Beryl will disrupt oil supplies, potentially driving prices up. Additionally, expectations of continued declines in crude stockpiles are likely to further support higher oil prices.

Oil prices traded flat over the week as the bullish momentum seemed to ease. The RSI remained above the 50 level for a month, while the MACD is declining toward the zero line from above, suggesting an easing of the bullish momentum. 

Resistance level: 84.75, 86.35

Support level: 82.10, 80.05