2025 Kicks Off With The Dollar In Control. NFP Ahead
USD Bulls Shatter 1.0350 Support. Pullbacks Incoming
The markets are starting to pick up speed after the winter holidays and the first trading day of the year marked the break of 1.0350, a level that was last touched in November 2022. The US Dollar is still boosted by a strong economy that outperforms its global counterparts. This in turn raises expectations that the Fed will keep rates relatively high throughout 2025.
The US Dollar Index (DXY) reached a 2-year high at 109.53 on Thursday, January 2 and is currently trading close to that level. A healthy labor market and sticky inflation have contributed to the dollar’s strength but this could be further fuelled by the new policies that will be instated during the Trump administration.
And speaking of the labor market, the first major release of the year is scheduled for this week: the Non-Farm Payrolls report. This means that we will probably see some interesting moves this week and risk appetite will probably increase.
Economic Calendar Highlights
Monday at 12:00 pm GMT we get the first major release of the week: the German Preliminary CPI. Inflation is expected to increase from the previous -0.2% to 0.3%, so we can expect volatility on Euro pairs if this forecast comes true.
The U.S. Services PMI will be released Tuesday at 3:00 pm GMT, followed Wednesday at 1:15 pm GMT by the ADP Non-Farm Employment Change. The latter is a privately issued report that tries to mimic the government-issued NFP that will come out 2 days later. Also Wednesday, at 7:00 pm GMT, the FOMC will release the Minutes of their latest meeting, offering insights into the reason that determined the rate vote.
The main event of the week is scheduled for Friday at 1:30 pm GMT: the Non-Farm Employment Report (NFP). It shows the changes in the total number of employed people during the previous month and it’s the main gauge for the health of the U.S. labor market. The NFP together with the Average Hourly Earnings and the Unemployment Rate that are released at the same time, will paint a detailed picture of the condition of the U.S. jobs market.
Technical Outlook – EUR/USD
Following the break of 1.0350, EUR/USD reached a low at 1.0220, which is a level that will act as support in the future. The main bias is clearly bearish but we may see a retracement soon.
The Euro erased some of the losses during Friday’s trading session, so we are already seeing rejection at 1.0220, which may push the pair into 1.0350 or even above it. If this happens, the next destination will become the downtrend line drawn from the top at 1.1200. We are finally getting some important economic releases after 2 weeks of pause, so the fundamental side will play a major role this week.
