US monthly jobs report overview

Friday's US economic docket highlights the release of the closely-watched US monthly jobs data. The report is scheduled to be released at 12:30 GMT and economists are confidently expecting another excellent report in May. The economy likely added 650K new jobs in May, enough to push the jobless rate to 5.9% from 6.1% in April.

Meanwhile, analysts at Deutsche Bank sounded a little more optimistic about the report and explained: “We are expecting a bounceback in May, with a rise in Nonfarm payrolls of +800K, which in turn would see the unemployment rate decline to a post-pandemic low of 5.9%. We note that it’s also worth bearing in mind some of the distributional variables that the Federal Reserve are tracking, in addition to the main numbers, as they seek to achieve their maximum employment objective.”

How could the data affect EUR/USD?

Ahead of the key event risk, the US dollar remained well supported by Thursday's upbeat economic releases and dragged the EUR/USD pair to three-week lows. The data indicated that the US recovery is gathering pace and fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. A stronger NFP print will further derail the assumption that interest rates will stay low for a long time and provide a fresh lift to the greenback, setting the stage for an extension of the pair's ongoing downtrend.

Yohay Elam, FXStreet's own Analyst offered a brief technical outlook for the major: “Euro/dollar is suffering from downside momentum on the four-hour chart and has dropped below the 200 Simple Moving Average. However, the Relative Strength Index is nearing the 30 mark, and falling below that level would put the pair in oversold territory.”

Yohay also offered important technical levels to trade the EUR/USD pair: “Some support awaits at the daily low of 1.2105, followed by 1.2055, a cushion from mid-May, and then 1.2015, 1.20 and 1.1945. Some resistance is at the daily high of 1.2130, followed by 1.2160, 1.2175 and 1.22, which played a role in EUR/USD's trading in recent weeks.”

Key Notes

  •  US Nonfarm Payrolls May Preview: Questions, questions needing answers

  •  US May Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises

  •  EUR/USD Forecast: Sell the rumor, buy the fact? Why Nonfarm Payrolls could result in a bounce

About the US monthly jobs report

The nonfarm payrolls released by the US Department of Labor presents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure.

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