Mixed U.S. NFP Report to Bolster Bullish EUR/USD Behavior

U.S. Non-Farm Payrolls (NFP) to Increase 180K in July..

Unemployment Rate & Average Hourly Earnings to Downtick.

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Trading the News: U.S. Non-Farm Payrolls

U.S. Non-Farm Payrolls

Another 180K expansion in U.S. Non-Farm Payrolls (NFP) may do little to tame the bullish behavior in EUR/USD amid limited expectations for three Fed rate-hikes in 2017.

Why Is This Event Important:

Even though the Federal Open Market Committee (FOMC) ‘expects to begin implementing its balance sheet normalization program relatively soon,’ a downtick in household earnings may drag on interest-rate expectations as officials warns ‘overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent.’ Unless Average Hourly Earnings pick up, Fed Fund Futures may continue to show a 50/50 chance for a move in December, and the U.S. dollar may depreciate against its major counter parts throughout the second-half of the year as market participants mull the timing of the next FOMC rate-hike.

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

2017

07/07/2017 12:30:00 GMT

178K

222K

-13

-8

June 2017 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute Chart

EUR/USD Chart

DailyFX 3Q Forecasts Are Now Available

The U.S. economy added another 222K jobs in June followed a 152K expansion the month prior. At the same time, the Unemployment Rate climbed to an annualized 4.4% from 4.3% May as the Labor Force Participation Rate unexpectedly widened to 62.8% from 62.7% during the same period, while Average Hourly Earnings increased 2.5% per annum amid forecasts for a 2.6% print. The initial market reaction was short-lived, with EUR/USD pulling back from the 1.1440 region to end the day at 1.1400.

How To Trade This Event Risk(Video)

Bearish USDTrade: Downtick in Household Earnings Drags on Interest-Rate Expectations

  • Need a green, five-minute candle subsequent the NFP report to consider a long EUR/USD position.
  • If the market reaction favors a bearish dollar position, buy EUR/USD with two separate lots.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bullish USD Trade: U.S. Job & Wage Growth Exceed Market Forecasts

  • Need a red, five-minute EUR/USD candle to consider a long dollar position.
  • Implement the same approach as the bearish dollar position, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily Chart

EUR/USD Daily Chart

Chart – Created Using Trading View

  • EUR/USD outlook remains tilted to the topside as the pair climbs to a fresh 2017-high (1.1910) in August, while the Relative Strength Index (RSI) continues to hold above 70.
  • Keeping a close eye on the gap from January-2015 (1.2000 down to 1.1955) as the region largely lines up with the next topside hurdle coming in around 1.1960 (38.2% retracement) followed by the 1.2042 (July 2012-low).
  • However, the lack of momentum to hold above the 1.1860 (161.8% expansion) region raises the risk for a near-term pullback in the euro-dollar exchange rate; may see the RSI may flash a textbook sell-signal over the coming days should the oscillator break below 70, with the first downside area of interest coming in around 1.1670 (50% retracement) followed by 1.1580 (100% expansion).
  • Interim Resistance: 1.1960 (38.2% retracement) to 1.2042 (July 2012-low)
  • Interim Support: 1.0980 (78.6% retracement) to 1.1000 (38.2% expansion)

— Written by David Song, Currency Analyst

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

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