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Fresh Yearly Lows in EUR/USD as US Unemployment Rate Falls to 5.9%

Fresh Yearly Lows in EUR/USD as US Unemployment Rate Falls to 5.9%

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- September NFPs beat easily at +248K and the Unemployment Rate drops to 5.9%.

- US Dollar rallies sharply after stronger data; just traded to new yearly against EURUSD.

- EURUSD trades below $1.2520, USDJPY back above ¥109.50..

The September Nonfarm Payrolls report was better than market participants expected, and the market is treating the data as a bigger surprise than the surface figures appear. The headline figure beat by some +33K at +248K overall, confirming the >+200K ADP Employment report seen earlier this week.

With the labor force participation rate decreasing by one-tenth to 62.7%, the Unemployment Rate was able to contract by two-tenths of a percent to 5.9%, below the expected unchanged figure. Yet as the wage growth figures appeared stagnant with no indication that a wave of inflation is coming – thus necessitating an accelerated rate hike timeline from the Fed – the report is truly only impressive on the surface.

Even after a strong run higher, the US Dollar has rallied around the data and US yields have increased. Here’s a look at the data:

- Change in Nonfarm Payrolls (SEP): +248K versus +215K expected, from +180K (revised higher from +142K).

- Change in Private Payrolls (SEP): +236K versus +210K expected, from +175K (revised higher from +134K).

- Unemployment rate (SEP): 5.9% versus 6.1% expected unch.

- Participation Rate (SEP): 62.7% from 62.8%.

See the US Dollar economic calendar for Friday, September 5, 2014.

Fresh Yearly Lows in EUR/USD as US Unemployment Rate Falls to 5.9%

The yield environment has been mixed for the US Dollar across the three timeframes we examine. Yields have risen in the belly of the curve on the day after the payrolls beat; yet longer-duration instruments have seen their yields fall over the past week. At the moment, our attention is on the 10-year US Treasury Note yield, as it has traded to the tune of a +0.121 correlation with the Dollar Index (DXY) on a 20-day rolling basis. That’s to say, the weaker US yield environment in recent days has had little influence over the US Dollar.

EURUSD 1-minute Chart: October 3, 2014 Intraday

Fresh Yearly Lows in EUR/USD as US Unemployment Rate Falls to 5.9%

Charts Created using Marketscopeprepared by Christopher Vecchio

The unexpected elevated NFP print stoked a US Dollar rally across the board, and the European currencies arguably saw the greatest impact. GBPUSD plunged to fresh second half of 2014 lows (below the Scottish referendum panic lows) just above $1.6000, and USDCHF traded above Sf0.9650. EURUSD took a significant spill lower as well, trading from as high as $1.2618 in the minutes ahead of the release to as low as $1.2517 shortly after. At the time this report was written, EURUSD was trading at $1.2527.

For trade setups in AUDUSD, EURUSD, and USDJPY around the NFP report, click the link below.

Read more: NFP Preview and Trade Setups in EUR/USD, AUD/USD, and USD/JPY

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

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