DXY Under Pressure, NFP Drops 23,000 in July - CPT Markets

Market Wrap-up: Weak NFP Hits USD; Gold and Oil Rise

Markets saw sharp moves after July Non-Farm Payrolls came in well below expectations. According to the US Bureau of Labor Statistics (BLS), non-farm payrolls fell by 23,000 jobs in July, while June payrolls were revised down to just 20,000 jobs.

Meanwhile, the unemployment rate edged lower to 4.1%, but the decline was largely driven by a further drop in the labour-force participation rate to 61.4%, its lowest level in more than five years. This suggests that more people are leaving the labour market rather than actively looking for work.

The data triggered a sharp repricing in Fed expectations, reducing the likelihood of tighter monetary policy in the near term and putting significant pressure on the USD. The DXY fell 0.5% to 99.41. The move supported major currencies including the British pound, euro and Japanese yen.

A weaker USD also provided a strong tailwind for gold, with the precious metal surging more than 2% to $4,336.11 per ounce. Over the past week, gold gained more than 7%, marking its strongest weekly advance since January 19.

In a report released on Friday, UBS also projected that gold could rise to $5,000 per ounce in the first half of 2027.

In energy markets, oil prices continued to move higher, with Brent rising more than 1% to $83.55 per barrel and US WTI gaining around 1% to $78.18 per barrel. The move came as Iran rejected direct negotiations with the US, while demands to end the naval blockade and sanctions remained unresolved.

Adding to supply-side risks, Iran-backed Houthi militants in Yemen claimed responsibility for a recent attack on Saudi Arabia's Jazan refinery and a tanker operated by the Abu Dhabi National Oil Company. The developments further elevated geopolitical risk across the Middle East and reinforced the risk premium in oil prices.

Looking ahead to this week, markets will receive several key US data releases, with CPI and the Producer Price Index (PPI) at the centre of attention. Unemployment Claims, Retail Sales and speeches from FOMC members will also be closely watched for further clues on the Fed's policy path.

XAU/USD: Gold Surges as Weak NFP Hits Fed Expectations

Key takeaway:

• Gold surged during the August 7 session to its highest level in seven weeks after a disappointing US jobs report reduced expectations for tighter Fed policy in the near term. The precious metal is also heading towards its strongest weekly gain in seven months.
• Gold gained more than 7% over the past week, marking its strongest weekly advance since January 19.
• UBS projects that gold could rise to $5,000 per ounce in the first half of 2027.

Technical Outlook:

• Daily Bias: Bullish
• Support: 4,300
• Resistance: 4,400

Oil: WTI Rises as Iran Tensions Lift Supply Risks

Key takeaway:

• WTI prices advanced as Tehran warned that negotiations over the shipping route would not result in the immediate reopening of the strategically important waterway.
• Iran also rejected direct negotiations with the US, while demands to end the naval blockade and sanctions remained unresolved.
• Supply side risks intensified after Houthi militants claimed responsibility for an attack on Saudi Arabia's Jazan refinery and a tanker operated by the Abu Dhabi National Oil Company.

Technical Outlook:

• Daily Bias: Bullish
• Support: 76.56
• Resistance: 81.00

DXY: USD Falls as Weak NFP Cuts Fed Rate Hike Bets

Key takeaway:

• The DXY weakened after a much weaker than expected NFP report reduced expectations for tighter Fed policy in the near term. However, the index recovered part of its losses as rising Middle East risks supported safe-haven demand for the USD.
• The CME FedWatch tool shows markets currently pricing around a 46% probability of a 25-basis-point Fed rate hike in September, down from 67% one week earlier.
• Investors are now focused on upcoming inflation reports, including CPI and PPI, for further signals on the Fed's monetary policy path.

Technical Outlook:

• Daily Bias: Bearish
• Support: 99.41
• Resistance: 100.00

EUR/USD: Euro Jumps as Weak NFP Weighs on USD

Key takeaway:

• The euro surged after the shock NFP report triggered a sharp reversal in expectations for a September Fed rate hike.
• German economic data also provided limited support for the euro.
• German industrial production rose 0.2% in June, exceeding expectations for a 0.1% increase but slowing from a 0.7% gain in May.
• Meanwhile, Germany's trade surplus narrowed to EUR 15.4 billion, below market expectations.

Technical Outlook:

• Daily Bias: Bullish
• Support: 1.15147
• Resistance: 1.15800

USD/JPY: U/J Falls as Yen Gains on Weak NFP

Key takeaway:

• The Japanese yen surged after the US NFP report weakened the USD.
• In Japan, the Ministry of Finance (MoF) confirmed that the US and Japan had jointly intervened in the foreign exchange market to address excessive volatility in the yen.
• Japanese Finance Minister Satsuki Katayama also said Japan would not hesitate to conduct further FX intervention with the US if necessary.

Technical Outlook:

• Daily Bias: Bullish
• Support: 157.21
• Resistance: 159.52

The latest market repricing is being driven by two dominant forces: a sharp deterioration in the US labour market and renewed geopolitical risk in the Middle East.

The weak July NFP pushed the USD lower and reduced expectations for tighter Fed policy, supporting gold and major currencies such as the euro and yen.

Gold's move above $4,300 reflects both USD weakness and stronger safe-haven demand, while its weekly gain of more than 7% highlights the scale of the repricing.

Oil is trading to a different macro driver, continued tensions between Iran and the US, unresolved restrictions on shipping routes and fresh attacks linked to the Houthi militants are keeping a geopolitical risk premium embedded in crude prices. Higher oil prices remain an upside inflation risk, which could complicate the Fed's policy outlook if the pressure persists.

For now, the market is moving away from the US labour market shock and towards the next inflation test.

CPI and PPI will be critical in determining whether the weak jobs data is enough to sustain the current USD sell-off and support for gold, or whether inflation risks force markets to reassess the Fed path. Unemployment Claims, Retail Sales and FOMC commentary will add further signals on the direction of the next repricing.

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