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Upbeat U.S. Non-Farm Payrolls (NFP) Report to Tame EUR/USD Advance

Upbeat U.S. Non-Farm Payrolls (NFP) Report to Tame EUR/USD Advance

David Song, Strategist

- U.S. Non-Farm Payroll (NFP) to Rise Less Than 200K for Fourth Consecutive Month.

- Annualized Average Hourly Earnings to Pick Up for First Time Since February.

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

U.S. Non-Farm Payrolls (NFP)

The U.S. Non-Farm Payrolls (NFP) report may tame the near-term advance in EUR/USD as both job and wage growth are projected to pick up in June.

Why Is This Event Important:

With the U.S. economy nearing full-employment, signs of higher household earnings may boost the appeal of the greenback as it encourages the Federal Open Market Committee (FOMC) to further normalize monetary policy over the coming months. Chair Janet Yellen and Co. may endorse a more aggressive approach amid the growing discussion to unload the balance sheet, and the central bank may also stay on course to deliver three rate-hikes in 2017 as Fed officials now see the economy growing an annualized 2.2% this year. However, a batch of mixed data prints may produce headwinds for the greenback as it drags on interest-rate expectations.

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

Impact that the U.S. NFP report has had on EUR/USD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2017

06/02/2017 12:30:00 GMT

182K

138K

+53

+67

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

EUR/USD 5-Minute

EUR/USD Chart

U.S. Non-Farm Payrolls (NFP) increased 138K in May after expanding a revised 174K the month prior, while the jobless rate unexpected narrowed to an annualized 4.3% from 4.4% as the Labor Force Participation Rate slipped to 62.7% from 62.9% during the same period. In addition, Average Hourly Earnings missed market expectations as the figure held steady at an annualized 2.5% for the second-month, and the ongoing weakness in household earnings may force the Federal Open Market Committee (FOMC) to buy more time as the central bank struggles to achieve the 2% target for inflation. The greenback lost ground following the mixed data prints, with EUR/USD clearing the 1.1250 region to end the day at 1.1280.

How To Trade This Event Risk(Video)

Bullish USD Trade: Job & Wage Growth Expands in June

  • Need a red, five-minute candle subsequent to the release to consider a short EUR/USD position.
  • If the market reaction favors a bullish dollar trade, 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: U.S. NFP Report Misses Market Forecast

  • Need a green, five-minute EUR/USD candle to favor a short dollar position.
  • Implement the same approach as the bullish dollar trade, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • Topside targets are on the radar as a near-term bull flag formation appears to be panning out, with the recent series of higher highs & lows raising the risk for a further advance in EUR/USD as the pair snaps back ahead of the former-resistance zone around 1.1290 (38.2% expansion).
  • A break of the June-high (1.1446) may trigger a more meaningful run at the 1.1480 (78.6% expansion) hurdle, with the next region of interest coming in around 1.1580 (100% expansion).
  • Interim Resistance: 1.1616 (2016-high) to 1.1670 (78.6% expansion)
  • Interim Support: 1.0980 (50% retracement) to 1.1020 (50% expansion)

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

IG Sentiment

Retail trader data shows 25.2% of traders are net-long EUR/USD with the ratio of traders short to long at 2.97 to 1. In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.06424; price has moved 7.3% higher since then. The number of traders net-long is 10.1% lower than yesterday and 31.4% higher from last week, while the number of traders net-short is 8.8% higher than yesterday and 2.8% lower from last week. For more information on retail sentiment, check out the new gauge developed by DailyFX based on trader positioning.

--- 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

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

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