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Lackluster U.S. NFP Report to Fuel Post-ECB EUR/USD Rally

Lackluster U.S. NFP Report to Fuel Post-ECB EUR/USD Rally

David Song, Shuyang Ren,


- U.S. Non-Farm Payrolls (NFP) to Expand 200+K for Second Month.

- Average Hourly Earnings to Slow to Annualized 2.3% from 2.5% in October.

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Trading the News: U.S. Non-Farm Payrolls

Another 200K expansion in U.S. Non-Farm Payrolls (NFP) may spur a near-term pullback in EUR/USD as it fuels bets for a December Fed rate-hike but, a marked slowdown in wage growth may dampen the appeal of the greenback as the central bank struggles to achieve the 2% target for inflation.

What’s Expected:


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Why Is This Event Important:

Even though Federal Open Market Committee (FOMC) keeps the door open to remove the zero-interest rate policy (ZIRP) at the December 16 interest rate decision, the majority may opt to carry the current stance into 2016 in an effort to further mitigate the downside risks surrounding the growth and inflation outlook.

Expectations: Bullish Argument/Scenario

Challenger Job Cuts (NOV)---13.9%
ADP Employment (NOV)190K217K
Gross Domestic Product (Annualized) (QoQ) (3Q P)2.1%2.1%

The ongoing decline in planned job-cuts accompanied by the pickup in private-sector activity may encourage U.S. firms to boost their work force, and a marked expansion in employment may heighten demand for the greenback as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

ISM Non-Manufacturing (NOV)58.055.9
IS Manufacturing (NOV)50.548.6
Advance Retail Sales (MoM) (OCT)0.3%0.1%

However, the slowdown in business outputs paired with the slack in household consumption may drag on hiring, and a dismal NFP print may prompt the Fed to further delay its normalization cycle in an effort to encourage a stronger recovery.

How To Trade This Event Risk(Video)

Bullish USD Trade: NFP Increase 200K or Greater in November

  • Need red, five-minute candle following the NFP print to consider a short trade on EUR/USD.
  • If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit.

Bearish USD Trade: U.S Employment Report Falls Short of Market Forecast

  • Need green, five-minute candle to favor a long EUR/USD trade.
  • Implement same setup as the bullish dollar trade, just in the opposite direction.

Join DailyFX on Demand for LIVE Coverage of the U.S. Non-Farm Payrolls Report!

Potential Price Targets For The Release


EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD appears to have marked a failed run at the March (1.0461) following the European Central Bank (ECB) interest rate decision as it breaks out of the downward trending channel carried over from the previous month, and the pair stands at risk for a larger correction as the Relative Strength Index (RSI) also appears to be threatening the bearish formation from August.
  • DailyFX Speculative Sentiment Index (SSI) shows the retail crowd has flipped net-short EUR/USD following the ECB meeting, with the ratio sliding to -1.58 as 39% of traders are now long.
  • Interim Resistance: 1.1052 (November high) to 1.1090 (50% retracement)
  • Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the previous month

PeriodData ReleasedEstimateActualPips ChangePips Change
OCT 201511/06/2015 13:30 GMT185K271K-113-102

October 2015 U.S. Non-Farm Payrolls


U.S. Non-Farm Payrolls (NFP) largely exceeded market expectations as the economy added 271K jobs in November following a revised 137K the month prior. At the same time, the unemployment rate slipped to an annualized 5.0% from 5.1%, while the participation rate unexpectedly climbed to 66.0 from 65.9 in September. The report also pointed to stronger wage growth as Average Hourly Earnings rose at an annualized rate of 2.5% from 2.3% during the same period. The strong employment report may keep the Federal Reserve on course to normalize monetary policy in 2015 as central bank see the economy appears to be approaching ‘full-employment.’ The greenback strengthened following the release, with EUR/USD breaking below the 1.0800 handle to close the day at 1.0736.

*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

Three Factors Warn of Perfect Storm in FX Markets - Caution Advised

Read More:

Dual Jobs Report to Threaten USD/CAD Consolidation Range

EUR/USD Retail FX Flips Net-Short on Mild ECB Easing Package

USD/JPY Testing Uptrend Resistance- Key NFP Levels

GBP Searches for Support- EUR/USD Outlook Mired by ECB Bets

COT - Gold Ownership Profile Similar to Prior Price Lows

--- Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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