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EUR/USD Weakness to Persist on Upbeat Non-Farm Payrolls (NFP) Report

EUR/USD Weakness to Persist on Upbeat Non-Farm Payrolls (NFP) Report

David Song, Strategist

- U.S. Non-Farm Payrolls (NFP) to Expand Less Than 200K for Third-Time in 2016.

- Average Hourly Earnings to Hold at Annualized 2.5%- Fastest Pace of Growth Since December.

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

A 160K expansion in U.S. Non-Farm Payrolls (NFP) paired with a downtick in the jobless rate may boost the appeal of the greenback and spur a larger pullback in EUR/USD as it fuels expectations for an imminent Fed rate-hike.

What’s Expected:

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Why Is This Event Important:

The Federal Open Market Committee (FOMC) may implement higher borrowing-costs over the coming months especially as the U.S. economy approaches ‘full-employment,’ but signs of stagnant wage growth may encourage the central bank to further delay its normalization cycle as officials warn ‘survey-based measures of longer-run inflation expectations were little changed, on balance, in recent months, while market-based measures of inflation compensation were still low.’

Expectations: Bullish Argument/Scenario

ADP Employment (MAY)173K173K
Personal Spending (APR)0.7%1.0%
Advance Retail Sales (MoM) (APR)0.8%1.3%

The pickup in private-sector consumption, one of the leading drivers of growth and inflation, may encourage U.S. firms to expand their labor force, and a pickup in job/wage growth may spark a bullish reaction in the greenback as it boosts interest-rate expectations.

Risk: Bearish Argument/Scenario

Construction Spending (MoM) (APR)0.6%-1.8%
Gross Domestic Product (Annualized) (QoQ) (1Q P)0.9%0.8%
Non-Defense Capital Goods Orders ex. Aircrafts (APR P)0.3%-0.8%

Nevertheless, fears of a slowing recovery accompanied by the ongoing weakness in business spending/investments may drag on the labor market, and a dismal NFP report may spark near-term headwinds for the dollar as market participants push out bets for a Fed rate-hike.

How To Trade This Event Risk(Video)

Bullish USD Trade: NFP Expands 160K+, Unemployment Rate Narrows

  • 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 Fails to Meet Market Expectations

  • 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.

Potential Price Targets For The Release


EUR/USD Daily Chart
  • Even though EUR/USD remains stuck in a narrow range, the longer-term upward trend may reassert itself over the coming days as price & the Relative Strength Index (RSI) fail to preserve the bearish formation from early May.
  • Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
  • Key Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

Check out the short-term technical levels that matter for USD/JPY heading into the report!

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

PeriodData ReleasedEstimateActualPips ChangePips Change
APR 201605/06/2015 12:30 GMT200K160K-10-41

April 2016 U.S. Non-Farm Payrolls


U.S. employment increased 160K in April following a revised 208K expansion the month prior, while the jobless rate held steady at an annualized 5.0% amid forecasts for a 4.9% print. At the same time, the Labor Force Participation Rate unexpectedly narrowed to 62.8% from 63.0%, while Average Hourly Earnings climbed an annualized 2.5% during the same period to beat expectations for a 2.4% advance. The initial advance in EUR/USD was short-lived, with the pair struggling to hold above the 1.1400 handle as it ended the day at 1.1398.

Get our top trading opportunities of 2016 HERE

Read More:

US DOLLAR Technical Analysis: Another Monthly Opening Range Worth Watching

Gold Prices in Free Fall- Shorts at Risk into NFP

EUR/GBP Breakdown Eyes Critical Support at 7520

GBP/USD Successful Re-Test of Former Resistance Line

--- Written by David Song, Currency Analyst

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

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