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The latest US Non-Farm Payrolls (NFP) report came in weaker than expected, signaling potential concerns for the labor market and the broader economy.
- Non-Farm Employment Change: 151K (Expected: 159K, Previous: 125K Revised)
- Unemployment Rate: 4.1% (Expected: 4.0%, Previous: 4.0%)
The lower-than-expected job creation suggests slowing momentum in the labor market, which could impact Federal Reserve policy decisions. The slight uptick in the unemployment rate to 4.1% raises concerns about economic stability.
Following the report, the USD experienced volatility as traders assessed the potential impact on future interest rate decisions. If the labor market weakens, the Fed may be pressured to consider easing monetary policy sooner than anticipated.
The US Dollar Index (DXY) is holding firm around the 103.5 level, which is a significant support zone, preventing a sharp downside reaction despite the weaker-than-expected NFP report. The market’s muted response suggests that the USD was already at support before the data release, limiting further declines.
Market Reactions Post-NFP:
- DXY remains stable at nearly 103.5, showing strong demand at this key level.
- GBP/USD oscillates around 1.2925, with a daily high of 1.2940 before pulling back. Post-news, the pair fluctuated between 1.2900 and 1.2925, indicating a lack of strong directional momentum.
- EUR/USD is hovering near 1.0860, maintaining earlier gains but struggling to break higher.
Both EUR/USD and GBP/USD are up 0.5% today, but they face critical resistance levels, suggesting that further upside is limited. The market seems hesitant to push higher as traders weigh the weak NFP data against broader USD support.
Outlook:
- If DXY holds 103.5, the USD’s downside may be limited, and a rebound could pressure major pairs like EUR/USD and GBP/USD.
- To extend gains, both EUR/USD and GBP/USD need a clear breakout above their respective resistance levels. Otherwise, they risk a pullback.
- Fed expectations and upcoming inflation data will be key drivers for the next significant move in the market.
Short-Term Bearish Outlook for EUR/USD and GBP/USD Despite Weak NFP
Despite the weaker-than-expected US NFP report, I believe that EUR/USD and GBP/USD may face a short-term bearish move due to the critical resistance levels they are currently testing. The market’s limited upside reaction suggests that the rally may run out of steam, and a pullback could be in play.
Key Factors Supporting a Pullback:
- DXY Holding at Strong Support (103.5): The US Dollar Index remains stable at a critical support zone. This limits further weakness in the USD, creating a potential floor for the dollar.
- EUR/USD and GBP/USD at Resistance: Both pairs are up 0.5% today, but their inability to break key resistance levels signals upside exhaustion.
- Lack of Follow-Through After NFP: The weak US jobs report did not trigger a strong bearish move in the dollar, suggesting that markets were already positioned for a softer NFP.
Short-Term Target for GBP/USD:
I see a potential pullback in GBP/USD toward 1.2800, with an extended move possibly reaching 1.2705 if bearish momentum picks up.
For EUR/USD, a rejection at resistance could lead to a short-term pullback toward 1.0800.
Conclusion:
Even though the NFP report was weak, the market’s reaction shows that USD weakness is not accelerating. A pullback scenario remains highly probable if buyers fail to push EUR/USD and GBP/USD above resistance. The following key move will depend on whether the dollar can hold above 103.5 DXY, reinforcing the case for a short-term retracement in major currency pairs.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
