- EUR/USD rose above 1.0900 after a tender US NFP report.
- Broad market concerns about a US economic slowdown increased on Friday.
- Next week: US ISM manufacturing PMI, EU retail sales
EUR/USD rose on Friday after the Greenback was crushed by tender US non-farm payroll (NFP) data. Market fears of an accelerating US economic slowdown had fueled a forceful risk aversion in global markets, but when US data turned negative too quickly, the US dollar was caught in a panic and fell across the board.
Outlook for the week ahead: We continue to focus on data and rate cut bets
The latest US NFP jobs data revealed that the US added a net 114,000 jobs in July, below the expected 175,000. Additionally, the previous month’s figure was revised down to 179,000 from an initial 206,000. The US unemployment rate also rose to 4.3%, its highest level since November 2021, while the U6 underemployment rate rose to 7.8% from 7.4% as those who were employed struggled to find work with enough hours.
Growth in average hourly earnings slowed to 0.2% month-on-month, below the 0.3% expected, while year-on-year wage growth eased to 3.6% from 3.8% previously.
The NFP’s U.S. jobs report on Friday showed the U.S. added a net 114,000 jobs in July, well below the 175,000 forecast, and the previous month’s figure was revised to 179,000 from an initial print of 206,000. The U.S. unemployment rate also rose to 4.3%, the highest reading since November 2021, while the U6 underemployment rate rose to 7.8% from 7.4% as employed people struggle to find work with enough hours.
Average hourly earnings growth also slowed to 0.2% month-on-month from an expected 0.3%, while year-on-year wage growth slowed to 3.6% from the previous 3.8%.
Economic indicator
Non-farm wages
The Nonfarm Payroll Report shows the number of novel jobs created in the United States during the previous month by all nonfarm payroll establishments; it is published by U.S. Bureau of Labor Statistics (BLS). Monthly changes in payrolls can be extremely volatile. This number is also subject to forceful revisions, which can also cause volatility on the Forex board. Generally speaking, a high reading is seen as bullish for the US dollar (USD), while a low reading is seen as bearish, although revisions from previous months and the unemployment rate are just as critical as the headline number. The market reaction therefore depends on how the market evaluates all the data in the BLS report as a whole.
As U.S. economic data turned generally sour, investors extended a two-day decline on growing concerns about a broad recession in the domestic U.S. economy, prompting a flight from risk assets and sending stocks significantly lower. According to CME’s FedWatch Tool, interest rate traders have fully priced in a September rate cut, with a 70% chance of a double 50-basis-point cut when the Fed announces its rate call on Sept. 18.
Next week, the US will release data on the July ISM manufacturing PMI (Index of Purchasing Managers Index). It is forecast to rise to 51.0 month-on-month, returning to expansionary territory from June’s contraction of 48.8. Pan-European retail sales for the fiscal year ending in June are due out early on Tuesday, with the median market forecast predicting a slight decline to 0.2% from the previous 0.3%.
Technical outlook for EUR/USD
Friday’s breakout of Fiber saw the EUR/USD revisit the upper end of a choppy downtrend channel on the daily candles. Bit has a ways to go before it can reclaim enough to attempt another breakout of 1.0950.
If bidders are able to extend the momentum, EUR/USD is on track for a technical rejection of the 200-day exponential moving average (EMA) at 1.0802, while sellers will look to push bids lower towards a short-term pullback towards the recent swing low below 1.0700.
