Robust NFP report fuels Dollar surge: EUR, GBP, and AUD face continued bearish pressure

Market context and key insights

The better-than-expected Non-Farm Payroll (NFP) report for December 2024 propelled the US dollar past the critical 109.37 target and set the stage for further gains. The data revealed a significant increase in job creation, with figures at 256k versus the expected 160k, driving the dollar up by approximately 1% in Friday's trade. This bullish momentum also pushed the US 10-year Government Bond Yield past the critical 4.700% level to close at 4.763, a notable daily rise of 1.58%. This analysis dives into the technical and fundamental implications for key currency pairs – EUR/USD, GBP/USD, and AUD/USD.

The US Dollar: Momentum builds towards 110.21

The robust NFP figures not only validated the strength of the dollar but also boosted the likelihood of achieving the next technical target at 110.21. This development reflects strong market confidence underpinned by solid labour market data and rising yields. Traders should monitor resistance at 110.21 while monitoring potential retracements to test previous support zones, particularly in response to economic data or unexpected geopolitical events. 

US Dollar (DXY) projected target before the NFP report

The US Dollar (DXY) reached its price target after the NFP report

US Government Bonds 10-Year Yield chart breaking out at 4.70% critical level

EUR/USD: Struggling below critical levels

Short-term analysis

The EUR/USD pair has been under consistent selling pressure, exacerbated by the dollar's bullish breakout. Closing Friday's trade down 0.57% at 1.0247, the pair has seen short-term support emerge at this level. However, the extended downtrend paints a bleak technical picture for the euro.

Medium to long-term outlook

The resistance level, which turned at 1.0354 on Thursday, signals a pivotal shift. With little economic optimism in the Eurozone, the next significant support zones lie at one dollar and 0.988. The bearish structure remains intact without any improvement in European economic fundamentals, with potential for further declines. Chart patterns over the last three months suggest continuity in this downward trajectory.

EUR/USD price chart after the release of the NFP data

GBP/USD: Testing key support zones

Recent developments

The British pound sharply declined over the past week, with Friday's 0.87% drop closing at 1.2215. This marks an approximate 3% weekly depreciation, highlighting the pound's vulnerability to dollar strength.

Key support levels

1.2215 serves as immediate support, but sustained pressure could open the door to the next level at 1.2076. Should the pair fail to hold these zones, the long-term bearish trend could see a decline towards 1.1968, especially considering the three-month downward momentum extending into January 2025.

GBP/USD price chart after the release of the NFP data

AUD/USD: Deterioration below critical 0.6200 level

Technical overview

The Australian dollar's downward spiral continued on Friday, with the pair closing 0.81% lower, firmly below the critical 0.6200 mark. A brief recovery from 0.6187 to 0.6299 earlier was swiftly reversed by the dollar's resurgence.

Short-term and long-term projections

While immediate support appears at 0.6118, the prevailing bearish trend signals further downside potential. The next critical targets are 0.6000 and 0.5969. With a strong dollar narrative fueled by robust US economic data, the Australian dollar faces mounting challenges in sustaining any significant recovery in the near term. 

AUD/USD price chart after the release of the NFP data

Outlook for traders

The latest NFP report underscores a pivotal shift in market dynamics, reinforcing the dollar's dominance and weighing heavily on EUR/USD, GBP/USD, and AUD/USD. While short-term support levels provide temporary relief, the prevailing bearish trends suggest further downside is likely, especially in the absence of significant positive changes in the respective economic fundamentals of Europe, the UK, and Australia. Traders should remain vigilant for critical support breaks and potential opportunities arising from the ongoing dollar rally.