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#1 04-10-2019 09:43:51

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2677

EUR/USD: how should we trade the pair in light of today's NFP report?

EUR/USD: how should we trade the pair in light of today's NFP report?

The EUR/USD rose sharply this week, as the pair approached the key psychological threshold of 1.10 yesterday, after a low of around 1.0880 on Tuesday, due to a general decline of the dollar.

The dollar was successively hurt by the ISM Manufacturing Index on Tuesday, then by the ADP US Employment Report on Wednesday, and by the ISM US Services Index yesterday.

All these key statistics have proved disappointing, rekindling fears of recession and, above all, raising expectations of a decline in the Fed's interest rate.

Indeed, while the probability of the Fed lowering its rates again by 0.25% at its next meeting this month was only 45% a week ago, it rose to almost 88% after this week's disappointing series of statistics.

However, this probability could still change significantly in one direction or another in the face of today's NFP report on US job creation, which will be published at 14:30 European time.

The NFP report in the spotlight today, a bad surprise awaiting?

According to economists' forecasts, the September NFP report should show 145k jobs created, better than the 130k recorded the previous month. The unemployment rate is expected to remain stable at 3.7% according to forecasts, while average hourly wages, which are particularly monitored by the Fed because they have a strong influence on inflation expectations, are expected to rise by 0.3% compared to 0.4% previously in annual data.

However, several factors point to the risk of unpleasant surprises. Indeed, other statistics have recently shed light on the US employment situation last month, and the data do not bode well.

The ADP report on US private employment for last month revealed 135k job creation compared to 140k anticipated, with a sharp downward revision of the previous month's figures to 157k from 195k in the first publication.

The employment sub-indices of the ISM Manufacturing and ISM Services indices also declined, to 46.3 from 47.2 previously for the manufacturing sector, and to 50.4 from 53.2 previously for the service sector.

In other words, the risks of unpleasant surprises seem high for this afternoon's NFP report, which could weigh on the greenback by further increasing the probability that the Fed will lower its rates again, much to the delight of the EUR/USD pair, which would automatically benefit from it.

Technical analysis of the pair

From a graphical point of view, this week's bullish movement gave rise to several buying signals, including the breaks above the 100 and 200 hour moving averages.

Currently, the recently approached and major psychological threshold of 1.10 will be considered as an immediate resistance, ahead of 1.1025, 1.1050 and 1.11.

On the downside, the 1.0960-65 zone will be the first potential support, before the 200-hour and 100-hour moving averages, located respectively at 1.0948 and 1.0933 at the time of writing this article. Below this, the psychological threshold of 1.09 and this week's lows around 1.0880 will be the next potential support and/or downside targets to watch for.

Currently, the eurodollar is trading at around 1.0975 on the forex.

EUR/USD Hourly chart

"Anything worth having is worth going for - all the way." - J.R. Ewing



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