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EUR/USD Rebound Vulnerable to Upbeat Non-Farm Payroll (NFP) Report

EUR/USD Rebound Vulnerable to Upbeat Non-Farm Payroll (NFP) Report

David Song,

- U.S. Non-Farm Payrolls to Print Below 200K for First Time Since May.

- Average Hourly Earnings to Slow for First Since March.

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Trading the News: U.S. Non-Farm Payrolls (NFP)

A 180K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by a downtick in the jobless rate may trigger a near-term decline in EUR/USD as the ongoing improvement in the labor market puts increased pressure on the Federal Open Market Committee (FOMC) to raise the benchmark interest rate sooner rather than later.

What’s Expected:

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Why Is This Event Important:

The next interest-rate decision on September 21 may reveal a growing dissent within the FOMC as Chair Janet Yellen argues ‘the case for an increase in the federal funds rate has strengthened in recent months,’ but a marked slowdown in Average Hourly Earnings may drag on interest-rate expectations as the committee persistently warns ‘most survey-based measures of longer-run inflation expectations were little changed, on balance, while market-based measures of inflation compensation remained low.’

Expectations: Bullish Argument/Scenario

Pending Home Sales (MoM) (JUL)0.7%1.3%
Housing Starts (MoM) (JUL)-0.8%2.1%
NFIB Small Business Optimism (JUL)94.594.6

The pickup in business confidence paired with the resilience in the U.S. housing market may foster a stronger-than-expected NFP report, and a positive development may spark a bullish reaction in the dollar as it boosts bets for an imminent rate-hike.

Risk: Bearish Argument/Scenario

ISM Manufacturing (AUG)52.049.4
Gross Domestic Product (Annualized) (QoQ) (2Q P)1.1%1.1%
Advance Retail Sales (JUL)0.4%0.0%

However, slowing outputs paired with the weakening outlook for global growth may drag on job/wage growth, and a series of dismal data prints may produce near-term headwinds for the greenback as it raises the Fed’s scope to further delay the normalization cycle.

How To Trade This Event Risk(Video)

Bullish USD Trade: NFP Expands 180K or Greater

  • Need red, five-minute candle following the print to consider a short EUR/USD position.
  • 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. Job/Wage growth Disappoints

  • 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
  • Failure to preserve the bullish formation from the end of July may spur a larger decline in EUR/USD especially as the Relative Strength Index (RSI) follows suit, with a break/close below 1.1110 (50% retracement), which also lines up with the 200-Day SMA (1.1114), raising the risk for a move back towards the July low (1.0951).
  • 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. NFP report has had on EUR/USD during the previous release

PeriodData ReleasedEstimateActualPips ChangePips Change
JUL 201608/05/2016 12:30 GMT180K255K-82-59

July 2016 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute


U.S. Non-Farm Payrolls (NFP) increased another 255K in July following the revised 292K expansion the month prior, while the jobless rate held steady at an annualized 4.9% as the Labor Force Participation Rate climbed to 62.8% from 62.7% during the same period. Moreover, Average Hourly Earnings crossed the wires at an annualized 2.6% to mark the fastest pace of growth for 2016, while a separate report showed the U.S. Trade Balance deficit widened to $44.5B from a revised $41.0B in May. The greenback advanced following the better-than-expected print, with EUR/USD slipping below the 1.1100 handle to end the day at 1.1082.

Get our top trading opportunities of 2016 HERE

Read More:

S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

EUR/JPY Technical Analysis: Sticking to the Range

EURUSD: Waiting for the Dip & Rip- Key Resistance at 1.1400

--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.