NFP Misses Forecast, Focus Shifts to U.S. CPI and ECB Rate
Dollar Bulls Target Key Support Levels Ahead of CPI and ECB Events.
The U.S. jobs market is starting to cool down, as evidenced by last week’s Non-Farm Payrolls report but despite this, the U.S. economy as a whole is still going strong. The NFP report showed that 142K new jobs were created, which is lower than the 164K forecast but still higher than the previous number which was revised from 114K to 89K.
It’s safe to say that job creation is not a problem at this time and it will not throw the economy in a recession. The other labor market indicators confirmed a healthy economy: the Average Hourly earnings increased from last month’s 0.2% to 0.4% and the Unemployment Rate dropped from 4.3% to 4.2%, in line with expectations.
Economic Calendar Highlights
This week the focus shifts from the labor market to the main gauge of U.S. inflation: the Consumer Price Index. Since the jobs report did not offer a clear answer to the 50-bps or 25-bps rate cut debacle, maybe the CPI will. The report is set for release on Wednesday at 12:30 pm GMT and the yearly number is expected to drop from 2.9% to 2.6%. There’s no change expected for the monthly CPI and Core CPI.
Thursday will be a very interesting day as the European Central Bank will announce the Main Refinancing Rate, which is expected to be cut from the current 4.25% to 3.65%. The release is scheduled for 12:15 pm GMT and will be followed at 12:45 pm GMT by the usual press conference held by ECBB President Christine Lagarde. The U.S. Producer Price Index will be released between the two events, at 12:30 pm GMT.
The last notable release of the week will be the Prelim UoM Consumer Sentiment survey, scheduled for Friday at 2:00 pm GMT.
Technical Outlook – EUR/USD
Last week the Euro bulls regained some of the losses that occurred after the failed break of 1.1175 resistance but the NFP release boosted the greenback and drove the pair lower. The week ended with the US Dollar bulls on the offensive and it looks like the pullback initiated at 1.1175 may still have a way to go.
The initial target for the dollar bulls will be the trough created around 1.1040. If that barrier is surpassed, we may see an extension into 1.1000 where a lot of buy orders will probably be placed.
The RSI is not showing any clear divergence and it is not in an extreme position, so it will not play a major role in the pair’s next move. The main price drivers this week will be the U.S. CPI numbers and the ECB rate announcement alongside the ECB press conference which is almost always a market mover.
