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

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

Updates to the U.S. Non-Farm Payrolls (NFP) report may curb the recent advance in EUR/USD as the economy is anticipated to add another 195K jobs in August.

At the same time, the Unemployment Rate is expected to narrow to 3.8% from 3.9% per annum in July, and signs of a stronger labor market should keep the Federal Reserve on track to further normalize monetary policy as central bank officials warn ‘it would likely soon be appropriate to take another step in removing policy accommodation.’

In turn, a positive development may spark a bullish reaction in the dollar as it boosts bets for four Fed rate-hikes in 2018, but another below-forecast NFP figure paired with 2.7% print for Average Hourly Earnings may drag on the greenback as it dampens the outlook for growth and inflation. With that said, a batch of mixed data prints may keep EUR/USD afloat, with the exchange rate at risk of staging a larger advance as there appears to be a broader shift in market behavior. Sign up and join DailyFX Currency Analyst David Song LIVEto cover the NFP report.

Impact that the U.S. NFP report has had on EUR/USD during the previous release

July 2018 U.S. Non-Farm Payrolls (NFP)

EUR/USD 10-Minute Chart

The U.S. economy added 157K jobs in July, which compares to the 248K expansion the month prior, while the Unemployment Rate narrowed to 3.9% from 4.0% per annum during the same period. A deeper look at the report showed the Labor Force Participation holding steady at 62.9% for the second month, with Average Hourly Earnings highlighting a similar dynamic as the index printed at 2.7% in August.

The initial reaction to the mixed data was short-lived, with EUR/USD pulling back from the 1.1600 region to close the day at 1.1566. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

• There appears to be a broader shift in EUR/USD behavior as both price and the Relative Strength Index (RSI) break out the bearish trends from earlier this year, with a move above the 1.1640 (23.6% expansion) to 1.1680 (50% retracement) region raising the risk for a run at the July-high (1.1791), which largely lines up with the 1.1810 (61.8% retracement) hurdle.
• However, lack of momentum to push back above the stated region raises the risk for range bound conditions as the 1.1510 (38.2% expansion) area appears to be holding up as near-term support.
• Next downside region of interest comes in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region followed by the 2018-low (1.1301).

For more in-depth analysis, check out the Q3 Forecast for EUR/USD

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— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.