NFP Ahead. Can the Dollar Extend Its Winning Streak?

EUR/USD struggles below 1.1400 after breaking long-term support

The dollar ended last week in the green, although it fell for the last two daily trading sessions of the period. Despite the setback at the end of the week, the US Dollar Index (DXY) is the highest it’s been since May of 2025.

As geopolitical tensions eased, the price of oil dropped sharply, which reduced inflationary pressures and slightly cooled expectations of a rate hike by the Fed in 2026. According to the CME FedWatch tool, the chances of a 25-bps rate increase sit at 30% for the July Meeting and at almost 47% for the September FOMC Meeting.

The Core PCE Price Index, which is the Fed’s preferred inflation measure, met expectations last week, coming in at 0.3%. At least according to the latest data, inflation is not a major concern, despite the energy crisis generated by the Middle East conflict. The Memorandum of Understanding signed by the US and Iran and the reopening of the Strait of Hormuz helped ease inflation concerns, but the peace is still fragile, and the situation could turn volatile fast.

This week, all eyes will be on the jobs data, with the release of the Non-Farm Payrolls report. Inflation data was just released last week, and it was largely in line with expectations, which means that the Fed is closely watching the labor market as part of its dual mandate to keep inflation on target and to maximize jobs creation.

Economic Calendar Highlights

The German Preliminary Consumer Price Index (CPI) will be the first notable release of the week, scheduled for Tuesday at 12:00 pm GMT. German inflation is expected to change 0.1%, while the previous was -0.2%. The ECB recently increased the interest rate from 2.15% to 2.40%.

On Wednesday at 1:00 pm GMT, Fed Chairman Warsh will participate in a panel discussion at the ECB Forum on Central Banking in Sintra. Other participants are ECB President Lagarde and BOE Governor Bailey, so we can expect to see volatility on USD, EUR, and GBP pairs.

The main event of the week will be the Non-Farm Payrolls report release, scheduled on Thursday at 12:30 pm GMT. This is easily the most important data for the US labor market and has a very high impact on the US Dollar. The Average Hourly Earnings and the Unemployment Rate will be released at the same time.

Technical Outlook – EUR/USD

The pair is now out of the long-term range established between 1.1900 and 1.1400. The last 2 days of last week created a pullback move that is currently testing 1.1400 and may turn it into resistance.

If the current level becomes resistance, we can expect to see more downside in the medium-term. However, it must be noted that the RSI was oversold last week and is now moving out of the zone. This could create some bullish momentum, but as long as the pair is trading below 1.1400, the bias remains bearish, with 1.1200 as a potential destination.