Dollar Risk Heats up as Trade Deal Deadline Approaches
EUR/USD at Multi-Year Highs. RSI Warns of Potential Pullback
The U.S. jobs market continues to be resilient, as shown by last week’s Non-Farm Payrolls report, which surpassed economists’ forecast of 111K jobs. The actual reading was 147K, and the unemployment rate dropped to 4.1% from 4.2%, while the forecast was an increase to 4.3%.
The resilience of the labor market somewhat supports Fed Chair Powell’s stance to keep the rate unchanged. Before the NFP release, the chances of a cut in July were at about 20%, but at the time of writing, the odds are around 4.5%, according to CME’s FedWatch tool. There’s no Fed meeting in August, but there’s a 66% chance the rate will be cut at the September meeting.
In the meantime, President Trump managed to get his Big Beautiful Bill signed. The massive spending bill was a source of contention between Trump and his political adversaries, but also between Trump and his previous allies. It was the spark that ignited the Trump-Musk feud, which is still a hot topic.
Going forward, the markets are turning their attention towards the deadline for Trump’s sweeping tariffs negotiations, which is July 9. The U.S. President said that he will start sending letters to the countries on which levies will be imposed, informing them of the new tariffs. This marks a shift from the previous ‘let’s negotiate’ stance. Thus far, agreements have been reached with the UK, Vietnam, and China, among others.
Economic Calendar Highlights
The week ahead is unusually quiet, with the FOMC Meeting Minutes being the only notable event. The Minutes will come out on Wednesday at 6:00 pm GMT, showing the details of the latest Fed meeting and offering insights into the reasons that determined the rate vote. The release may create notable volatility if it contains clear clues regarding the data the Fed is watching when assessing the next cut.
On Friday, Germany and France will release their Final Consumer Price Indexes, but this version usually goes mostly unnoticed because the values are mostly known from the previous releases.
Technical Outlook – EUR/USD
The pair reached a multi-year high at 1.1830 and is currently trading at 1.1765. Several factors are weighing on the dollar, including Trump’s spending bill and the trade deal deadline, so the technical aspect will be secondary.
But looking strictly at the technical side, the pair needs to retrace lower or spend some time trading sideways. The uptrend is overextended as shown by the overbought RSI, and although it does not show bearish divergence, it signals that a pullback may happen next.
The levels to watch are 1.1700 as immediate support, followed by 1.1600, which was the previous peak and may act as support. To the upside, the next resistance is located at 1.1900.
