Forex responds to U.S. Nonfarm Payroll

Nonfarm payrolls in the world’s largest economy jumped 151K in October after falling a revised 41K the month prior amid expectations of 60K. At the same time, the unemployment rate remained unchanged at 9.6 percent during the same period. Taking a look at the breakdown of the report, private payrolls added a massive 159K, while manufacturing payrolls slid 7K.

Meanwhile, average hourly earnings increased 0.2%, which is slightly higher than my forecast of 0.1%, but wasn't enough to bring the annualized rate up from 1.7%. Not to overlook, government employment dropped 8K versus 148K, thus, it appears that the plunge in census workers have faded. Indeed, today’s report is a step in the right direction; however, the labor market will need to gather further upside momentum in order to bring down the employment rate. The release is of particular interest due to the fact that the Fed recently announced $600 billion of new asset purchases in order to stimulate employment and consumer prices.

U.S. Nonfarm Payrolls

CHART 1

Source: Bloomberg – Prepared by Michael Wright

EUR/USD Daily Chart

CHART 2

Source: Bloomberg – Prepared by Michael Wright

Taking a look at price action, the EUR/USD has halted its three day advance and now looks poised to test 1.400. Technical developments are mixed at the moment and there is no clear direction on a technical or fundamental basis. The euro is expected to come under pressure in the coming months as governments in the bloc implement tough austerity measures in order to battle their high budget debts. At the same time, recent news that the ECB refused to disclose internal documents concerning Greece’s methods to hide its government debt is adding weight on the euro. Meanwhile, the Fed’s asset purchases continue to weigh on the greenback. All in all, wait for further developments before entering into a trade.

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