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

Updates to the U.S. Non-Farm Payrolls (NFP) report may do little to curb the U.S. dollar weakness following the Federal Reserve meeting as the economy is anticipated to add 165K jobs in January.

Image of DailyFX economic calendar

Anything below market consensus is likely to rattle the already battered greenback as the Federal Open Market Committee (FOMC) drops the hawkish forward-guidance for monetary policy, and the central bank may show a greater willingness to keep the benchmark interest rate on hold in 2019 as ‘the case for raising rates has weakened somewhat.’

In turn, a lackluster development may spark a bullish reaction in EUR/USD, but another better-than-expected NFP print may fuel a larger pullback in the euro-dollar exchange rate as it puts pressure on the FOMC to further normalize monetary policy this year. 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 had on EUR/USD during the previous release

Image of NFP reaction

December 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 312K in December after expanding a revised 176K the month prior, while the Unemployment Rate unexpectedly increased to 3.9% from 3.7% per annum the month prior as the Labor Force Participation Rate widened to 63.1% from 62.9% during the same period. A deeper look at the report showed Average Hourly Earnings climbing to 3.2% from 3.1% in November, with the gauge for Average Weekly Hours edging up to 34.5 from 34.4.

The reaction to the stronger-than-expected NFP report was short-lived, with EUR/USD bouncing back from a session low of 1.1346 to end the day at 1.1397. 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 break above the November-high (1.1500) offers a constructive outlook for EUR/USD, with the 1.1290 (61.8% expansion) region offering near-term support.
  • Need a move back above the 1.1510 (38.2% expansion) hurdle to open up the Fibonacci overlap around 1.1640 (23.6% expansion) to 1.1680 (50% retracement), with the next region of interest coming in around 1.1810 (61.8% retracement), which largely lines up with the September-high (1.1815).

For more in-depth analysis, check out the 1Q 2019 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.