Non-Farm Payroll Helping the USD Regain its Footing

Non-Farm Payroll Helping the USD Regain its Footing

NFP came in at 217K, within the range of forecast which averaged about 215K. Although this reading was lower than the previous month’s 282K (revised down from 288K), it marks the 3rd straight month of 200K+ job growth and is at the upper range of data since the financial crisis began. This pace of jobs growth should allow the FOMC to raise rates in 2015 as planned.

NFP 6/6
(source: ForexFactory)

The unemployment rate was unchanged at 6.3%. Economists had forecast a slight rise to 6.4%. The jobless rate is taking a backseat to the participation rate, which was unchanged at a 35-year low of 62.8%.

participation rate 6/6

(Source: Bureau of Labor Statistics)

Unless the participation reverses from a downtrend to an uptrend, the unemployment rate won’t really matter.

Still, the jobs report today was relatively positive, and the USD is finding some footing after trading sideways to slightly bearish for a couple of sessions.

The US Dollar Index shows a top that was forming under 80.70. After a spike to 81.00, price fell again. However, after the NFP price seems to have found support at the previous support/resistance pivot around 80.30.

US Dollar Index 4H Chart
usdx 6/6

As you can see, the USD has been in a choppy bullish mode in the past month and there has not been any strong indication of a reversal, though this week’s spike up to 81.00 does suggest exhaustion and a possible consolidation. Today’s reaction to the NFP keeps a bullish bias and the market is neutral-bullish.

Let’s take a look at the EUR/USD, USD/JPY, and Gold

EUR/USD 4H Chart eurusd 6/6

After an initial dip following the ECB policy announcement, EUR/USD about-faced, and rallied to a new high on the week, above a consolidation resistance at 1.3650. Price stalled just above 1.3650, and direction remains uncertain after the NFP. Ability to pull back down below 1.36 could be a bearish continuation signal.

With the ECB hinting further stimulus and the FOMC looking to raise rates in 2015, it would be tough for a rally, except for maybe a bullish correction in the near-term towards 1.37. However, I prefer the bearish outlook, and still want to see a nice bounce off 1.36 before considering even a short-term bullish one toward the 1.37 handle.

Only a break above 1.38 revives a longer-term bullish outlook, but would go against what the central bank positions suggest: weaker EUR and a Neutral to strong USD.
USD/JPY 4H Chart
usdjpy 6/6

Since May 20 low of 100.85, USD/JPY has been rallying, but stalled at channel resistance ahead of the NFP. I noted yesterday that if the NFP is at or slightly above expectations, USD/JPY’s short-term bullish mode should continue and the focus could be on the 103 handle.

So far the initial reaction helped USD/JPY find its footing above 102 and the channel support, thus putting the

A break below 102 and the channel support would put the focus back toward the 100.85 low, and the 100.75, 2014-low.

Gold (XAU/USD) 4H Chart
gold 4H chart

Gold price was seeking a bottom above 1240 after the ECB hinted further stimulus. Today’s NFP was USD-positive and gold price stalled around 1257.75 and fell below 1250 after the jobs report.

The technical picture in the 4H chart remains bearish unless traders hold gold above 1250 after this initial reaction and push through 1260. That would confirm a price bottom, and bring the 1290-1300 area in sight.

Otherwise, the bearish outlook puts pressure on the 1240 level, below which the 1200 handle, and the 2014-low of 1183 comes into play.


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