TRADING THE NEWS: U.S. NON-FARM PAYROLLS (NFP)

Even though the U.S. Non-Farm Payrolls (NFP) are anticipated to increase another 198K in November, another 3.7% print for Average Hourly Earnings may drag on the dollar as it dampens the outlook for growth and inflation.

Signs of limited wage growth may spark a bearish reaction in the greenback as it undermines the Federal Reserve’s scope to further embark on its hiking-cycle, and a batch of lackluster data prints may fuel the recent rebound in EUR/USD as market participants scale back bets for above-neutral interest rates.

In turn, the Federal Open Market Committee (FOMC) may deliver a dovish rate-hike at the next interest rate decision on December 19, but another better-than-expected NFP report may weigh on EUR/USD as it puts pressure on Chairman Jerome Powell & Co. to extend the hiking-cycle. 

IMPACT THAT THE U.S. NFP REPORT HAS HAD ON EUR/USD DURING THE PREVIOUS RELEASE

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

EUR/USD 5-Minute Chart

U.S. Non-Farm Payrolls (NFP) increased 250K in October after expanding a revised 118K the month prior, while the Unemployment Rate held steady at 3.7% per annum for the second consecutive month. A deeper look at the report showed an unexpected pickup in the Labor Force Participation Rate, with the figure climbing to 62.9% from 62.7% in September, with Average Hourly Earnings also picking up to 3.1% from 2.8% during the same period.

The U.S. dollar gained ground following the positive development, with EUR/USD slipping below the 1.1400 handle to close the day at 1.1387. 

EUR/USD DAILY CHART

(Click on image to enlarge)

• Near-term outlook for EUR/USD remains uneventful as it carves a narrowing range, with the Relative Strength Index (RSI) highlighting a similar dynamic as the oscillator appears to be stuck in a wedge/triangle formation.
• With that said, EUR/USD remains capped by the 1.1510 (38.2% expansion) region, with the first areaof support coming in around 1.1220 (78.6% retracement).