Talking Points:

- DXY, U.S. Treasury Yields Rally as NFP Metrics Show Faster Wage Growth, Rise in Labor Force Participation.

- Euro Outlook Mired by Head-and-Shoulders Formation; Waiting for Neckline Break.

- USD/CHF Rally Vulnerable as Pair Quickly Approaches Key Resistance Confluence.

- USD/CAD Preserves Bullish Formation Even Canada Adds 10.0K Jobs.

- USD/JPY Snaps Weekly Range, Eyes July-High (114.50).

- Missed the DailyFX Roundtable? Sign Up and Join the Team LIVE to Cover Major Data Prints Along with Key Trade Setups!

Join DailyFX Strategists Michael Boutros, David Song, and Christopher Vecchio to cover the U.S. Non-Farm Payrolls (NFP) report along with key trade setups going into the first full week of August. Highlighted setups include DXY, EUR/USD, USD/CHF, USD/CAD and USD/JPY.

EUR/USD 5-Minute Chart

EUR/USD Chart

Despite the 33K contraction in U.S. Non-Farm Payrolls (NFP), the greenback initially gained ground against its major counterparts as Average Hourly Earnings unexpectedly jumped to an annualized 2.9% in September, while the Labor Force Participation widened to 63.1% from 62.9% during the same period to mark the highest reading since March 2014.

Higher wage growth paired with the pickup in the U.S. labor force should keep the Federal Open Market Committee (FOMC) on course to deliver three rate-hikes this year, and the central bank may continue to implement higher borrowing-costs in 2018 as ‘the Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.’

Fed Fund Futures

DailyFX 4Q 2017 Forecasts Are Now Available!

Nevertheless, Fed Fund futures show expectations the FOMC will stay on hold throughout the first three-months of 2018 especially as Chair Yellen’s term is set to expire on February 3, and the committee may largely endorse a wait-and-see approach at the start of the year as central bank officials trim the longer-run forecast for the benchmark interest rate. In turn, the dollar stands at risk of facing a more bearish fate over the coming months as the central bank head warns the FOMC ‘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.

EUR/USD Daily Chart

EUR/USD Daily Chart

EUR/USD appears to have made a failed run at the August-low (1.1662) as it snaps back from a weekly-low of 1.1670, but the pair remains at risk of staging a larger correction as it breaks the monthly opening range. Downside targets remain on the radar as EUR/USD initiates a series of lower highs & lows, with a break/close 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 (1.1594).

DailyFX Calendar

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--- Written by David Song, Currency Analyst

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

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