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EURUSD Consolidates Gains Ahead of Nonfarm Payrolls-TraderFactor

EUR/USD Consolidates Gains Below 1.0900 Ahead of Nonfarm Payrolls

EUR/USD is showing positive momentum as it moves closer to the 1.0900 mark. The Euro’s upward movement is influenced by the US Dollar’s challenges, while market focus remains on the imminent US NFP data release.

Following a drop to new two-month lows near 1.0780, an area also coincident with the transitory 100-day SMA, EUR/USD managed to regain some balance and return to the region well beyond 1.0800 the figure on Thursday.

EURUSD Daily Chart

Impact of FOMC Event

The USD Index (DXY) remained within the multi-session consolidative range as market participants continued to digest the latest FOMC event on January 31. Powell’s statement about the Federal Reserve’s readiness to sustain the current policy rate for an extended period, along with the uncertainty about consistent advancements in inflation and the possibility of initiating rate reductions, has influenced market sentiment.

Investors’ Expectations and Cautious Outlook

Investors are debating the probability of interest rate cuts in March or May, with CME Group’s FedWatch Tool indicating around 37% and 60% likelihood, respectively. The anticipation surrounding the release of the US Nonfarm Payrolls report on February 2 is causing investors to exercise caution. This report is expected to provide additional insights into the timing of potential future decisions on interest rates.

Potential Impact on Market Sentiment

Another solid print from Payrolls in January is anticipated to leave unchanged the notion of a tight labor market and should bolster the perception of a soft landing amidst a stubbornly resilient economy. This could eventually lend extra support to the idea of a May rate cut by the Fed and therefore propping up the US dollar as well as yields in the short term at least.

EUR/USD Intraday Analysis

The EUR/USD is expected to make a further advance of 30 – 60 pips. It is recommended to consider a BUY position with an entry price (pivot) at 1.0835 and target/take profit levels at 1.0900 and 1.0930, respectively. The risk is set at 2% per trade for this intraday period, with the spot market showing upside momentum as indicated by the RSI.

GBP/USD Intraday Analysis

The GBP/USD intraday bias remains bullish, with expectations of an upswing of 20 – 50 pips. A BUY recommendation is suggested with an entry price (Pivot) of 1.2710 and target/take profit levels at 1.2770 and 1.2800. The risk for this trade is also set at 2% per trade, and the spot market reflects upside momentum according to the RSI.

GBPUSD Daily Chart

GBPUSD Daily Chart nonfarm payrolls

Crude Oil (WTI)‎ (H4)‎ Intraday Analysis

For Crude Oil (WTI)‎ (H4), the intraday analysis points to a key resistance level at 74.80, with a potential downtrend to 73.20-73.70. It is advised to consider a SELL position with an entry price (Pivot) at 74.80 and target/take profit levels at 73.70 and 73.20, respectively. The risk for this trade is set at 1% per trade, and as long as 77.70 acts as resistance, expect choppy price action with a bearish bias.

WTI Crude Oil

WTI Crude Oil nonfarm payrolls eur/usd

Summary

These recommendations are based on intraday analysis and should be considered within the specified periods and risk parameters.

Understanding Nonfarm Payrolls and Their Impact on Financial Markets

The release of the Nonfarm Payrolls (NFP) report by the United States Bureau of Labor Statistics (BLS) is a pivotal event that significantly influences currency rates, interest rate policies, and the decision-making process of the Federal Reserve (Fed).

The NFP report provides crucial insights into the US labor market, offering data on the number of jobs added or lost in non-farm sectors such as manufacturing, construction, and healthcare. Additionally, it includes information on the unemployment rate and average hourly earnings. Given the size and significance of the US economy, these statistics hold substantial weight in global financial markets.

Currency rates are particularly sensitive to the NFP release. A stronger-than-expected NFP report, indicating robust job growth and declining unemployment, can bolster the value of the US dollar against other major currencies. Conversely, a weaker report may lead to a depreciation of the dollar as it signals potential economic challenges.

The NFP report also plays a critical role in shaping interest rate expectations. Positive NFP data, suggesting a healthy labor market and potential wage growth, can prompt speculations of higher interest rates by the Fed to curb inflation. On the other hand, disappointing NFP figures might lead to expectations of dovish monetary policies to stimulate economic growth.

Moreover, the Fed closely monitors the NFP report when making decisions regarding its monetary policy, especially concerning interest rates. A strong NFP report may sway the Fed towards tightening monetary policy, potentially leading to rate hikes. Conversely, a weak NFP report may influence the Fed to consider accommodative measures to support economic recovery.

The Nonfarm Payrolls report is a vital economic indicator with far-reaching implications for currency exchange rates, interest rate trajectories, and the policy decisions of the Federal Reserve. Market participants carefully analyze this report to gauge the health of the US economy and make informed investment and trading decisions.

Disclaimer:

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.