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

Updates to the U.S. Non-Farm Payrolls (NFP) report may fuel the recent decline in EUR/USD as the economy is expected to add another 192K jobs in July.

Image of DailyFX economic calendar

Even though the Federal Reserve keeps the benchmark interest rate on hold in August, recent remarks from Chairman Jerome Powell & Co. suggest the central bank will continue to embark on its hiking-cycle as ‘the Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.’

In turn, the Federal Open Market Committee (FOMC) may continue to prepare U.S. households and businesses for higher borrowing-costs, and an upbeat NFP report may trigger a bullish reaction in the dollar as it fuels bets for four Fed rate-hikes in 2018.

However, another batch of mixed data prints may drag on the greenback as it dampens the outlook for growth and inflation, and EUR/USD may continue to consolidate over the coming days as tracks the range-bound price action carried over from the previous month. Sign up and join DailyFX Currency Strategist Christopher Vecchio LIVE to cover the NFP report.

Impact that the U.S. 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)

JUN

2018

07/06/2018 12:30:00 GMT

195K

213K

+41

+27

June 2018 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute Chart

Image of EURUSD 5-minute chart

U.S. Non-Farm Payrolls (NFP) increased another 213K after expanding a revised 244K in May, while the Unemployment Rate unexpectedly climbed to 4.0% from 3.8% per annum as the Labor Force Participation Rate widened to 62.9% from 62.7% during the same period. A deeper look at the report showed Average Hourly Earnings holding steady at 2.7% versus forecasts for a 2.8% print, while separate figures coming out of the U.S. Census Bureau showed the trade balance deficit narrowing to $43.1B in May from $46.1B the month prior.

The greenback struggled to go hold its ground following the mixed data prints, with EUR/USD bouncing back from the 1.1210 region to end the day at 1.1742. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of EURUSD daily chart
  • Keep in mind, the string of failed attempts to test the July-high (1.1791) may push EUR/USD back towards the lower bounds of its recent range, with the 1.1510 (38.2% expansion) region on the radar as it largely lines up with the June-low (1.1508).
  • Need a break/close below the stated region to open up the downside targets for EUR/USD, with the first region of interest coming in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion) followed by the 1.1290 (61.8% expansion) hurdle.

For more in-depth analysis, check out the Q3 Forecast for EUR/USD

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.