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

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

2018-10-05 11:05:00
David Song, Strategist
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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 weakness in EUR/USD as the world’s largest economy is anticipated to add another 185K jobs in September.

Image of DailyFX economic calendar

The Unemployment Rate is also expected to narrow to 3.8% from 3.9% per annum in August, and signs of a more robust labor market may encourage the Federal Reserve to deliver another rate-hike in 2018 as Chairman Jerome Powell notes that ‘the economy is strong, unemployment is near 50-year lows, and inflation is roughly at our 2 percent objective.

In turn, the Fed officials may continue to prepare U.S. households and businesses for higher borrowing-costs 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,’ and a set of positive developments may ultimately heighten the appeal of the dollar as market participants gear up for higher U.S. interest rates.

However, Average Hourly Earnings are projected to slow to 2.8% from 2.9% per annum during the same period, and a batch of mixed data prints may rattle the dollar as it undermines speculation for four Fed rate-hikes in 2018. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

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)

AUG

2018

09/07/2018 12:30:00 GMT

190K

201K

-38

-66

August 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 201K in August following a revised 147K expansion the month prior, while the jobless rate held steady at 3.9% per annum during the same period amid projections for a 3.8% print. Nevertheless, a deeper look at the report showed the Labor Force Participation Rate narrowing to 62.7% from 62.9% July, while Average Hourly Earnings unexpectedly climbed to 2.9% from 2.7% during the same period.

The greenback gained ground following the ongoing improvement in the U.S. labor market, with EUR/USD slipping below the 1.1600 handle to end the day at 1.1552. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of eurusd daily chart
  • EUR/USD stands at risk giving back the rebound from the 2018-low (1.1301) amid the failed attempt to test the June-high (1.1852), with recent price action raising the risk for further losses as the Relative Strength Index (RSI) snaps the bullish formation carried over from August.
  • The 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region is now on the radar following the decline from earlier this week, with a break/close below the stated region opening up the next downside region of interest around 1.1290 (61.8% expansion), which sits just beneath the 2018-low (1.1301).

For more in-depth analysis, check out the Q4 Forecast for EUR/USD

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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

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