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EUR/USD. U.S. June Nonfarm Payrolls: a fly in the ointment

At the start of the American session on Friday, key data on the growth of the labor market in the United States were published. It was a long-awaited release: throughout the week, the greenback gradually increased the pressure, reflecting increased demand. In particular, the EUR/USD pair has shown a downward trend over the past few days, although with impressive price pullbacks. But if we look at the daily chart, we will see that the pair started the trading week at 1.1935, and today (before the release of Nonfarm) it updated the three-month low at 1.1805. Traders followed the principle of "buy the rumors" amid fairly strong forecast values, as well as amid "hawkish" speeches by some representatives of the Fed (in particular, Thomas Barkin).

But, to the disappointment of dollar bulls, immediately after the release, the market also followed the trading principle – "sell the news". Immediately after the publication of the data, the US currency fell under a wave of sales – in just an hour, the dollar index collapsed from 92.65 to 92.41 points. Given the fact that many components of today's release came out in the "green zone", a natural question arises – can we trust the current weakening of the greenback? Especially on Friday, on the eve of a long weekend (Monday will be a day off in the United States in connection with the celebration of Independence Day)?


In my opinion, the current reaction is of an emotional nature. Therefore, it is impractical to make trading decisions at the moment – many traders take profits without risking leaving open positions on the eve of a three-day "mini-vacation". While the release itself cannot be called disappointing, except for some moments. Therefore, the June Nonfarm report will still make a statement, but not today, given the notorious "Friday factor".

Apparently, traders were scared off by the "capital" indicator: the unemployment rate in the United States last month rose slightly relative to the May value, reaching 5.9%. According to preliminary forecasts, this indicator was supposed to decrease to 5.6% from the previous value of 5.8%. But it should be noted that it is a lagging economic indicator, so by and large, today's figures reflected rather the May dynamics. The increase in the number of people employed in the manufacturing sector of the economy was also disappointing – instead of the expected growth to 28,000, the indicator increased by only 15,000.

But in general, the U.S. labor market, let's say, has developed a cruising speed. In particular, the number of people employed in the non-agricultural sector increased by 850,000, although the average forecast was at the level of 700,000. The June result is the best result since August last year when the American economy produced one and a half million jobs. And here it is also necessary to pay attention to the trend: the indicator has been consistently growing for the past two months: if 278,000 jobs were created in April, then in May – 580,000, and in June, I repeat, – 850,000. The positive dynamics, as they say, is "visible to the naked eye". A similar situation has developed in the private sector of the economy: in May and June, the indicator consistently increased, reflecting the recovery processes. Today, the indicator came out at the level of 662,000 with a forecast of growth to 600,000.

This suggests that the June report was definitely strong, however, according to some experts, "not strong enough" in the context of a possible Fed reaction. In other words, today's figures are unlikely to prompt members of the Federal Reserve to adjust incentives at the July meeting. But at the same time, they will allow the members of the American regulator to maintain a "hawkish" position, thereby indicating the recovery of the American economy.



By and large, the greenback today became a victim of inflated expectations of traders: over the past few days, the dollar strengthened its positions, fueling hopes for "unconditionally strong" Nonfarm Payrolls. At the same time, the difference between almost 70 expert estimates was very large – the forecast range was from 400,000 to 1.1 million jobs created. The ADP report, which was in the "green zone" the day before yesterday, also did a "disservice". It is obvious that traders were counting on exceeding the forecast values, given the dynamics of unofficial data. Therefore, the initial market reaction was not in favor of the greenback.

Nevertheless, today's Nonfarm allows dollar bulls to hold their positions and even gain momentum - especially in pair with the euro, which is under the background pressure of the ECB's dovish position. At the moment, we see a somewhat distorted picture ahead of the weekend, so today it is most advisable to be outside the market.

From a technical point of view, the EUR/USD pair on the daily chart is still located between the middle and lower lines of the Bollinger Bands indicator and under all the lines of the Ichimoku indicator (including under the Kumo cloud). Ichimoku has formed a bearish signal "Parade of lines", warning of a further decline in the price. It is noteworthy that the main support level (the intermediate barrier is 1.1800) in the medium term is located at 1.1750 - this is the lower line of the Bollinger Bands indicator on the daily and weekly charts. If buyers finally lose the level of 1.1850, then a 100-point decline to the support level at 1.1750 will only be a matter of time. In fact, the pair will change the price level again, dropping "by one step". Taking into account the "Friday factor", it is most expedient to make trading decisions on the pair on Tuesday (that is, on the first full working day).

The material has been provided by InstaForex Company -