- U.S. Non-Farm Payrolls (NFP) to Increase Another 180K in May.

- Average Hourly Earnings to Rebound After Slowing for Last Two Consecutive Months.

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

U.S. Non Farm Payrolls

A 180K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by a pickup in household earnings may yield a bullish reaction in the greenback as it puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy over the coming months.

Why Is This Event Important:

With the U.S. economy nearing full-employment, the FOMC may stay on course to implement three rate-hikes in 2017, and the central bank may show a greater willingness to start unloading the balance sheet later this year as officials see inflation gradually approaching the 2% target over the policy horizon. However, Fed Governor Lael Brainard argued ‘if the soft inflation data persist, that would be concerning and, ultimately, could lead me to reassess the appropriate path of policy,’ and signs of subdued price growth may push the committee to change its tune as ‘market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations were little changed on balance.

Have a question about the currency markets? Join a Trading Q&A webinar and ask it live!

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)

APR

2017

05/05/2017 12:30:00 GMT

190K

211K

+15

+41

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

EUR/USD 5-Minute

EUR/USD Chart

U.S. Non-Farm Payrolls (NFP) increased 211K jobs in April following a revised 79K expansion the month prior, while the jobless rate unexpectedly narrowed to an annualized 4.4% from 4.5% during the same period to mark the lowest reading since 2007. Despite the pickup in job growth, Average Hourly Earnings narrowed for the second straight month, with the figure slipping to 2.5% per annum from 2.6% in March. The greenback struggled to hold its ground following the batch of mixed data, with EUR/USD snapping back from 1.0945 to end the day at 1.0998.

How To Trade This Event Risk(Video)

Bullish USD Trade: U.S. Job & Wage Growth Exceed Market Forecast

  • Need a red, five-minute candle following the NFP report to consider a short EUR/USD position.
  • If market reaction favors a bullish dollar position, sell EUR/USD with two separate lots.
  • Set stop at the near-by swing high/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.

Bearish USD Trade: Non-Farm Payrolls Report Disappoints

  • Need a green, five-minute EUR/USD candle to favor a short dollar position.
  • Carry out the same setup as the bullish dollar setup, just in the opposite direction.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • Broader outlook for EUR/USD is tilted to the upside amid the shift in market behavior, and the pair may continue to retrace the decline from the previous year as price & the Relative Strength Index (RSI) preserve the bullish formations carried over from late-2016.
  • However, failure to test the November-high (1.1299) may generate a near-term pullback in the euro-dollar exchange rate especially as the RSI pulls back from overbought territory, with a break/close below the Fibonacci overlap around 1.1140 (23.6% expansion) to 1.1160 (38.2% expansion) opening up the next downside region of interest around 1.0980 (50% retracement) to 1.1020 (50% expansion).
  • Interim Resistance: 1.1330 (23.6% expansion) to 1.1340 (78.6% retracement)
  • Interim Support: 1.0780 (100% expansion) to 1.0830 (38.2% retracement)

Make Sure to Check Out the DailyFX Guides for Additional Trading Ideas!

IG Sentiment

Retail trader data shows 28.6% of traders are net-long with the ratio of traders short to long at 2.5 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.06661; price has moved 5.1% higher since then. The number of traders net-long is 13.2% higher than yesterday and 3.3% higher from last week, while the number of traders net-short is 1.3% lower than yesterday and 1.9% lower from last week. For more information on retail sentiment, check out the new gauge developed by DailyFX based on trader positioning.

For More Updates, Join DailyFX Currency Analyst David Song for LIVE Analysis!

--- Written by David Song, Currency Analyst

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

To be added to David's e-mail distribution list, please follow this link