The NFP report last Friday beat expectations once again on the headline number raising the record streak to 14. The details of the report weren’t that great though. The unemployment rate jumped from 3.4% to 3.7%, which makes it the biggest M/M increase since the pandemic. The average workweek hours worked ticked lower (employers generally lower the hours before laying off people).
All in all, there was something for everyone there. The optimists saw a solid jobs growth and the higher unemployment rate and soft average hourly earnings as less labour market tightness that should reduce inflationary pressures. The lower average weekly hours worked may be seen as just a return to pre-pandemic trend.
The pessimists, on the other hand, focused more on the details rather than the headline number as generally it’s not the absolute number that matters but the trend.
Yesterday, the US ISM Services PMI came out much lower than expected at 50.3 barely missing the contraction territory. The employment sub-index fell into contraction and prices paid sub-index decreased substantially returning to the May 2020 level. As a consequence, the market further priced out additional rate hikes from the Fed.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, the EURUSD is displaying some bottoming out price action. The price started to consolidate right at the key 1.07 support and given the pricing out of hawkish expectations, we should see some more weakness in the USD going forward. The trend remains skewed to the downside as the moving averages point south and the market keeps printing lower lows and lower highs.
The double top at 1.1033 may hint that EURUSD still has some legs to the downside, with the neckline at 1.0533 being the first target for the sellers. The divergence between the two tops with the MACD also increases the odds of the pattern playing out eventually.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, the price has broken out of the falling channel, which signals that the bearish momentum became weaker. In fact, EURUSD started to diverge with the MACD falling into the 1.07 support and eventually rallied as the US data disappointed and reversed the hawkish expectations.
The target for the buyers, in case we get a bigger pullback, should be the 1.0850 level and it looks attainable barring any big upside surprise in the CPI report next week. The sellers, on the other hand, will need to break below the 1.0674 level to regain conviction and target new lower lows.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we have some short term support zone at the 1.0711 level where the moving averages have crossed to the upside after the miss in the ISM Services PMI. The bullish momentum looks good for a run towards the 1.0760 resistance first and the 1.0850 level next. If EURUSD breaks down and falls below the 1.07 handle, then the sellers should regain control and push the price to new lower lows.
