The US Non-Farm Payroll (NFP) report showed that 252K jobs were added in December compared to an upwardly revised 353K reading in November. Forecasts called for a reading of around 241K, but the 252K reading is within the range of expectations, so not a major surprise to the upside.
The unemployment rate did fall to 5.6% from 5.8%. This also beat forecast of 5.7%. However, the caveat is that the labor participation rate dropped to 62.7% a 38-year low (lowest since Dec. 1977). So despite the increase in jobs, the overall employment picture did not improve much in December.
Average hourly earnings fell by -0.2% in December, falling for the first time since July 2013. The FOMC’s consideration to raise rates will be dependent on wage growth, and today’s report is disappointing in this aspect.
With a mixed report today, the USD might not have enough juice for another push. Let’s take a look at the reactions in USD-crosses:
USD/JPY has been consolidating, and started the year rejected by a resistance around 120.80. This week, it found support at 118.05 and rallied, but held below 120. After the NFP report, USD/JPY had an initial shake in both directions.
If price closes the week above 120, we have a bullish continuation at hand and should see USD/JPY test the highs around 120.75-85 next week. However, a close below 118.70 would keep USD/JPY in a bearish correction mode.
EUR/USD has been bearish this week but stalled ahead of the NFP above 1.1754, but held under 1.1820. After the NFP report, we saw the pair come back below 1.18 and maintain a bearish outlook. The euro is weak, so even if the USD is not gaining, EUR/USD might still be pressured. If price can close the week above 1.1820, then we can consider some bullish correction next week toward 1.19. A break below 1.1750 however is likely to continue a downtrend that has the 2005-low at 1.1638 in sight for the next week.
GBP/USD continued its bearish trend at the start of the year, stalling above 1.5035 ahead of the NFP. It is showing some signs of a bullish correction as it rounds out a mini price bottom.
Now after the NFP, if GBP/USD can close above 1.51, the bullish correction scenario is still in play with the 1.52 support/resistance pivot in sight. A close below 1.51 however favors a bearish continuation heading into the next week, with the 1.5034 level in sight, and with risk of breaking lower towards 1.50.
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