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The US economy added 254,000 new jobs in September, according to the NFP report, while the unemployment rate was confirmed at 4.1%.
Following the news, the US dollar first declined, but it soon recovered and recorded gains that day as speculative interest realized the economy was in far better shape than first thought. Market participants now think that the Fed would lower the benchmark interest rate by 25 basis points in response to it.
The expected payroll figure is 115k, but more attention should be given to the unemployment rate, which is anticipated to remain steady at 4.1%. A slight miss of these expected figures is unlikely to change the Fed outlook but could lead to some short term spikes across financial markets.
Financial markets are likely to react positively to steady job creation, which may ease concerns about the labor market without significantly impacting the Fed’s upcoming meeting on November 6-7.
If the NFP report shows fewer jobs than expected, it could raise concerns about the labor market, leading to a potential drop in the USD which might open the door for a 50bps rate cut. Conversely, strong job growth could support a modest 25bps rate cut, which might strengthen the USD.
The chart shows that the labor market is in an overall downtrend with actual numbers beating forecasts. A decrease in jobs forecasts is bearish for the dollar even if the numbers met expectations.
TECHNICAL ANALYSIS
Price has been in a downtrend since the September 27 high at 1.341 which formed a supply zone. Price went below the pivot line and broke major support which turned resistance now. Price is trying to stabilize near 1.299 with the 100 EMA trying to go above the price.
Strong US data could continue the trend downwards and send the price to the support level at 1.283. Weak data could break the trend and the price could cause the price to re-break previous technical levels after declining for several days might try to recover ground around 1.31.
In reaction to the data, the U.S. Dollar is prone to significant volatility. Traders should be careful while placing trades and be prepared for unexpected movements during the reaction of the news.
