- U.S. Non-Farm Payrolls (NFP) to Increase 80K- Slowest Pace of Growth Since March.

- Average Hourly Earnings to Hold Steady at 2.5% for Sixth Consecutive Month.

- Sign Up & Join the LIVE DailyFX Roundtable Non-Farm Payrolls Coverage.

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

Non-Farm Payrolls

Even though U.S. Non-Farm Payrolls (NFP) are anticipated to increase another 80K in September, the lack of wage growth may curb the recent weakness in EUR/USD as it undermines the Federal Reserve’s ability to implement higher borrowing-costs.

Keep in mind, recent comments from the Federal Open Market Committee (FOMC) suggests the central bank will stay on course to deliver three rate-hikes this year as 2017 voting-member Patrick Harker has already ‘penciled in’ a move for December, while Vice-Chair Stanley Fischer, who departs from the central bank on October 13, expects ‘wages will start going up at some stage.’

In turn, a positive development may trigger a bullish reaction in the U.S. dollar, but signs of subdued price pressures may push Fed officials to highlight a more gradual path for the benchmark interest rate as Chair Janet Yellen notes that the central bank ‘may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.

Impact that the U.S. Non-Farm Payrolls (NFP) report has had on EUR/USD during the last print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

AUG

2017

09/01/2017 12:30:00 GMT

180K

156K

-13

-52

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

EUR/USD 5-Minute Chart

EUR/USD Chart

The U.S. economy added another 156K jobs in August following a revised 189K expansion the month prior, while the jobless rate unexpectedly climbed to an annualized 4.4% from 4.3% during the same period even as the Labor Force Participation rate held steady at 62.9% per annum. At the same time, Average Hourly Earnings failed to meet market expectations as the figure printed at 2.5% versus forecast for a 2.6% clip. Despite the initial spike higher in EUR/USD, the market reaction was short-lived, with EUR/UDS slowly working its way back below the 1.1900 handle to end the day at 1.1861 ahead of the U.S. holiday weekend.

How To Trade This Event Risk(Video)

Bullish USD Trade: NFP Report Boost Outlook for Growth and Inflation

  • Need a red, five-minute candle following the print to consider a short EUR/USD trade.
  • If the 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: U.S. Household Earnings Remain Subdued

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

Potential Price Targets For The Release

EUR/USD Daily Chart

EUR/USD Daily Chart

DailyFX 4Q 2017 Forecasts Are Now Available!

  • Near-term outlook for EUR/USD remains capped by the former-support zone around 1.1860 (161.8% expansion), with the pair at risk for a larger correction as both price & the Relative Strength Index (RSI) snap the bullish formations from earlier this year.
  • EUR/USD appears to be making another run at the August-low (1.1662), with a break/close below the below the 1.1670 (50% retracement) region raising the risk for a move back towards 1.1580 (100% expansion), which sits just below the 100-Day SMA(1.1589).
  • Interim Resistance: 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion)
  • Interim Support: 1.1390 (61.8% retracement) to 1.1400 (61.8% expansion)

EUR/USD Retail Sentiment

EUR/USD Retail Sentimen

See how shifts in EUR/USD retail positioning are impacting trend- Click here to learn more about sentiment!

Retail trader data shows 43.8% of traders are net-long EUR/USD with the ratio of traders short to long at 1.28 to 1. In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.07897; price has moved 8.5% higher since then. The percentage of traders net-long is now its highest since September 28 when EUR/USD traded near 1.17803. The number of traders net-long is 9.5% higher than yesterday and 5.8% higher from last week, while the number of traders net-short is 6.7% lower than yesterday and 9.3% lower from last week.

--- Written by David Song, Currency Analyst

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

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