EUR/USD to Stay Under Pressure on Upbeat Non-Farm Payrolls (NFP) Report

– U.S. Non-Farm Payrolls (NFP) to Climb 185K in March, Unemployment Rate to Downtick to Annualized 4.0% from 4.1%.

– Average Hourly Earnings to Increase to 2.7% per Annum from 2.6% in February. Will the Federal Open Market Committee (FOMC) Endorse Four Rate-Hikes for 2018?

Trading the News: U.S. Non-Farm Payrolls (NFP)

A 185K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by signs of faster wage growth may keep EUR/USD under pressure as it encourages the Federal Open Market Committee (FOMC) to implement higher borrowing-costs over the coming months.

A further improvement in labor market dynamics may encourage the FOMC to deliver four rate-hikes for 2018 as ‘the Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,’ and Chairman Jerome Powell and Co. may show a greater willingness to extend the hiking-cycle as the economy nears full-employment.

However, a batch of lackluster developments may produce headwinds for the greenback as it drags on interest-rate expectations, with EUR/USD at risk for a rebound as it preserves the March range.

Impact that the U.S. NFP report has had on EUR/USD during the previous print

February 2018 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute Chart

U.S. Non-Farm Payrolls (NFP) surged 313K in February amid forecasts for a 205K expansion, while the jobless rate held steady at an annualized 4.1% as the Labor Force Participation rate unexpectedly widened to 63.0% from 62.7% in January. A deeper look at the report showed Average Hourly Earnings narrow to an annualized 2.6% from a revised 2.8% in January to mark the first slowdown since October, while Average Weekly Hours bounced back during the same period as the gauged climbed to 34.5 from 34.3 the month prior.

EUR/USD faced a mixed reaction despite the pickup in the headline reading for NFP, with the pair bouncing back from a session low of 1.2273 to end the day at 1.2303. Want More insight? Join the DailyFX Team Live to cover the fresh updates to the U.S. employment report.

EUR/USD Daily Chart

• EUR/USD stands at risk for a larger pullback as it preserves the series of lower-highs from earlier this week, with a break/close below the 1.2230 (50% retracement) region raising the risk for a move back towards 1.2140 (50% retracement) region, which sits just beneath the March-low (1.2155).
• Keeping a close eye on the Relative Strength Index (RSI) as it threatens the bullish formation and appears to be snapping the trendline carried over from late last year.
• However, another failed attempt to break/close below 1.2230 (50% retracement) may keep EUR/USD within the March-range, with a move back above the 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion) region opening up the 1.2430 (50% expansion) hurdle.

For more in-depth analysis, check out the Q2 Forecast for EUR/USD

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— Written by David Song, Currency Analyst

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