Dollar lower following non-farm payroll

Nonfarm payrolls in the world’s largest economy fell 95K in September after tumbling 57K the month prior amid economists’ expectations of -5K. At the same time, the unemployment rate remained unchanged at 9.6 percent. The breakdown of the report showed that private payrolls rose less than forecasts, while manufacturing payrolls unexpectedly dropped 6K. Following the dismal report, most major currencies pushed higher against the U.S. dollar but quickly reversed course. Going forward, we may see the greenback regain some ground against the euro, Aussie, and the kiwi as U.S. traders come online.

The data does not bode well for the world’s largest economy as concerns regarding QE measures linger. Spending going forward will likely scale back as consumers’ fear further declines in the labor force, while credit conditions remain tight. It is worth noting the massive drop in census workers; however, there are only approximately 6,000 census workers that remain on payrolls.

U.S. Non-Farm Payrolls

CHART 1

Source: Bloomberg

Taking a look at price action, the EUR/USD rallied initially following the disappointing report; however, the pair quickly reversed course and now looks poised to crossover the lower bounds of the ascending channel which has remained intact since the beginning of September. A close below this range will validate downside risks as the pair trades in overbought territory.

EUR/USD Daily Chart

CHART 2

Source: Bloomberg – Prepared by Michael Wright

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