Dollar Index Struggles Near $101.35 as Markets Eye ADP Employment Data

Market Overview

The EUR/USD pair is holding steady after a series of mixed European PMI data. Spanish Services PMI came in slightly lower at 54.6 vs. 54.8 expected, while Germany’s Services PMI held at 51.2, matching forecasts.

On the U.S. side, the July trade deficit remained unchanged at -$78.8 billion, while JOLTS Job Openings dropped to 7.67 million, falling short of the expected 8.09 million, signaling potential labor market softness. U.S. factory orders rose 5%, above forecasts of 4.7%.

Events Ahead

Investors are eyeing Thursday’s ADP Non-Farm Employment Change, expected at 144K. Unemployment Claims are forecast at 231K.

Additionally, the ISM Services PMI at 51.3 may influence both U.S. 10-year bond yields and the Dollar Index (DXY), which recently traded at 101.24.

These data points could impact EUR/USD, with traders anticipating volatility based on employment and service sector performance.

US Dollar Index (DXY)

The Dollar Index (DXY) is trading at $101.243, slightly down by 0.03%, signaling some short-term weakness. The 4-hour chart shows that DXY has dropped below its pivot point of $101.360, indicating a bearish sentiment. Immediate resistance lies at $101.578, followed by $101.864 and $102.120.

On the downside, key support is found at $101.032, with further levels at $100.781 and $100.541. The 50-day Exponential Moving Average (EMA) at $101.491 and the 200-day EMA at $101.775 are adding to the downward pressure.

Unless the price breaks back above $101.360, the trend remains bearish. A break above this pivot could shift momentum toward a more bullish outlook. For now, caution is advised as the DXY trends lower.

US 10-year Bond Yields

The US 10-year Treasury yield is currently sitting around 3.76%, after a recent drop from 3.88%. This decline in yield reflects a shift toward safer assets, which often leads to a lower yield on bonds as demand rises.

For the US dollar, a falling yield can signal that investors are seeking safety, usually causing some weakening in the dollar’s strength. When Treasury yields decline, it generally reduces the appeal of holding US dollars because it signals lower returns on investments tied to US interest rates.

If this trend continues, it could indicate further pressure on the US dollar in global markets, especially against other major currencies. Key levels to watch include support at 3.73% and resistance near 3.83%.

EUR/USD Technical Forecast

EUR/USD is currently trading at $1.10873, up 0.05% on the 4-hour chart. The pair has broken above a key resistance level at $1.10748, which now acts as a crucial support.

Both the 50-day and 200-day Exponential Moving Averages, at $1.10719 and $1.10616 respectively, are reinforcing this support zone. Immediate resistance is seen at $1.11104, followed by $1.11320 and $1.11583.

If the price stays above $1.10748, we could see further bullish momentum. However, a drop below this level might signal a bearish reversal, with key supports at $1.10571 and $1.10330.

For now, the bias remains slightly bullish above $1.10748, with a possible upside toward $1.11104.