NFP Disappoints with a 142K Print; EUR/USD’s Pullback Might be Sold

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NFP Disappoints with a 142K Print; EUR/USD Pullback Might be Sold

The US Non-Farm Payroll (NFP) report for August disappointed forecasts. According to the Bureau of Labor Statistics (BLS), there were 142K jobs added to the economy in August. This is the second lowest reading this year next to the 129K print for January. July’s NFP was 212K and economists’ forecasts were around a 226K print for August.

US Non-Farm Payroll:
NFP August 2014

(click to enlarge; source: forexfactory.com)

This is probably the first significantly disappointing data, especially from the jobs market. We have been getting strong employment data, and Thursday’s ADP Non-farm employment change reading did not warn of such a gap between data and expectations.

ADP Non-Farm Employment Change: 204K, Forecast: 218K, Previous 212K

the historic chart shows that the improvement in the jobs market looked promising in Q2, but seems to have peaked as we got 2 straight months of disappointing data in July and August.

EUR/USD Reaction and Outlook:

The US Dollar has been rallying persistently since June or July. Meanwhile, the euro has been bearish since May, and the EUR/USD has been falling since the May and 2014-high at 1.3993. On 9/4, the ECB cut rates, planned to implement purchase of asset-backed securities, and has QE on the table. EUR/USD fell sharply and stalled at 1.2925 ahead of the NFP data.

EUR/USD 1H Chart 9/5
eurusd 1h chart 9/5

(click to enlarge)

We are seeing a USD-negative reaction as EUR/USD rallies from a near-term price bottom. While the EUR/USD might have put in bottom for the short-term at 1.2925, the bullish outlook might need to be limited.

Fibonacci Retracement:
First we can expect sellers in the 1.3040-1.3050 area, which contains the 50-hour simple moving average, and the 50% retracement of the 9/4 bearish swing. If price does respect this level as resistance and the 1H RSI holds below 60, the pressure would be toward the 1.2925 low, with downside risk toward 1.29.

The bullish reaction and outlook should be seen as a near-term reaction to be faded, but we might be proven wrong if traders push EUR/USD back above 1.3160, the high on the week. This would introduce a significant consolidation/bullish correction scenario, in which case the 1.2925 low might hold for the rest of the month.

Previous Post by Author: USD/JPY Threatening a Long-term Trendline from 2008

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.