US monthly jobs report overview

Friday's US economic docket highlights the release of the closely-watched US monthly jobs data for July. The popularly known NFP report is scheduled for release at 12:30 GMT and is expected to show that the economy added 250K jobs during the reported month, down from the 372K in June. The unemployment rate, however, is expected to hold steady at 3.6% in July. Apart from this, investors will take cues from Average Hourly Earnings, which could offer fresh insight into the possibility of a further rise in inflationary pressures.

According to Yohay Elam, Senior Analyst at FXStreet, "real or "whisper" estimates for the NFP stand at around 300,000 or even 350,000. A higher bar means a greater chance for disappointment." Nevertheless, any divergence from the expected readings would infuse some volatility and produce some meaningful trading opportunities in the FX market.

How could the data affect EUR/USD?

Heading into the key release, the US dollar regains some positive traction on Friday and exerts some downward pressure on the EUR/USD pair. Against the backdrop of the hawkish remarks by several Fed officials this week, a stronger NFP print would revive bets for a large rate hike move at the September FOMC meeting and lift the buck.

Conversely, a weaker reading would add to worries about a possible global economic downturn and continue to benefit the safe-haven greenback. This, along with the energy crisis in Europe, which might drag the Eurozone economy faster and deeper into recession, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Eren Sengezer, Editor at FXStreet, outlines important technical levels to trade the EUR/USD pair: “First technical support seems to have formed at 1.0200, where the 20-period and the 50-period SMAs on the four-hour chart align. If the pair drops below that level and starts using it as resistance, 1.0150 (Fibonacci 23.6% retracement of the latest downtrend) and 1.0100 (psychological level, static level) could be seen as the next bearish targets.”

“On the other hand, interim resistance is located at 1.0230 (Fibonacci 38.2% retracement) before 1.0260 (100-period SMA). A four-hour close below the latter could be seen as a significant bullish development and trigger another leg higher toward 1.0300 (psychological level, Fibonacci 50% retracement),” Eren adds further.

Key Notes

  •  Nonfarm Payrolls Preview: High expectations set deal the dollar a blow, create buying opportunity

  •  EUR/USD Forecast: Upbeat NFP could drag euro back below 1.0200

  •  EUR/USD appears offered near 1.0220 prior to Payrolls

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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