Dismal NFP Report to Fuel EUR/USD Resilience Ahead of French Election
- 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)
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||Pips Change|
|04/07/2017 12:30:00 GMT||180K||98K||-8||-40|
March 2017 U.S. Non-Farm Payrolls (NFP)
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
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
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