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Dismal NFP Report to Fuel EUR/USD Resilience Ahead of French Election

Dismal NFP Report to Fuel EUR/USD Resilience Ahead of French Election

2017-05-05 08:00:00
David Song, Strategist
Share:

- U.S. Non-Farm Payrolls (NFP) to Rise 190K, Jobless Rate to Uptick to Annualized 4.6%.

- Average Hourly Earnings to Expand 2.7% Per Annum for Second Straight Month.

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

DailyFX Calendar

The U.S. Non-Farm Payrolls (NFP) report may generate a mixed market reaction as the economy is anticipated to add 190K jobs in April, while the Unemployment Rate is projected to uptick to an annualized 4.6% from 4.5% the month prior. Moreover, household earnings are expected to hold steady at 2.7% per annum, and a lackluster labor report may fuel the near-term resilience in EUR/USD especially as market attention turns to the final around of the French election.

Why Is This Event Important:

With Fed Fund Futures now pricing a greater than 70% probability for a June rate-hike, the fresh speech from Chair Janet Yellen may trigger a more meaningful reaction as market participants continue to gauge the timing and pace of the normalization cycle. A more detailed approach in unloading the Fed’s balance sheet may curb the recent advance in the euro-dollar exchange rate as the Federal Open Market Committee (FOMC) adopts a more aggressive approach in normalizing monetary policy, but the event may fail to prop up the greenback should the central bank head merely try to buy more time.

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Impact that the NFP report has had on EUR/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2017

04/07/2017 12:30:00 GMT

180K

98K

-8

-40

March 2017 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute

EUR/USD Daily Chart

The U.S. economy added a lackluster 98K jobs in March following a 219K expansion the month prior, but a deeper look at the report showed the jobless rate unexpectedly narrowed to an annualized 4.5% from 4.7% during the same period even as the Labor Force Participation held steady at 63.0% per annum. Moreover, the Underemployment Rate slipped to 8.9% from 9.2% to mark the lowest reading since 2007, while average Hourly Earnings narrowed to an annualized 2.7% from 2.8% in February. Despite the initial bounce in EUR/USD, the move was short-lived, with the exchange rate pulling back from 1.0667 to end the day at 1.0589.

How To Trade This Event Risk(Video)

Bearish USD Trade: Employment Report Shows U.S. Approaching Full-Employment

  • Need a green, five-minute candle following the NFP report to consider a long EUR/USD position.
  • If market reaction favors a bearish dollar trade, buy EUR/USD with two separate lots.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bullish USD Trade: NFP Expands 190K; Jobless Rate & Wage Growth Hold Steady

  • Need a red, five-minute EUR/USD candle to favor a long dollar position.
  • Carry out the same setup as the bearish dollar setup, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • The near-term breakout in EUR/USD may gather pace as the pair trades above 200-day SMA (1.0838) for the first time since October, with price & the Relative Strength Index (RSI) extending the bullish formations from late-2016; next topside hurdle comes in around 1.1020 (50% expansion) followed by the Fibonacci overlap around 1.1140 (23.6% expansion) to 1.1160 (38.2% expansion).
  • However, the momentum indicator appears to be diverging with price and suggests the recent advance in getting exhausted as it struggles to push into overbought territory; first downside region of interest comes in around 1.0780 (100% expansion) to 1.0790 (38.2% expansion), which lines up with former trendline resistance.
  • Interim Resistance: 1.1140 (23.6% expansion) to 1.1160 (38.2% expansion)
  • Interim Support: 1.0470 (38.2% expansion) to 1.0500 (50% expansion)

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. 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.

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