Employment Is Not Slowing Down… and neither Is the Fed
EUR/USD Close to a Double Top Ahead of Inflation Data
The employment data announced Friday strengthened the argument for additional increases in the Federal Reserve interest rates next month. Non-Farm Payrolls increased by 236K in March, very close to the 228K predicted, and the Unemployment Rate dropped to 3.5% from 3.6% in February.
These strong labor statistics are likely to bolster the greenback throughout the week or at least until the release of the significant US inflation figures, scheduled for Wednesday.
According to CME’s FedWatch tool, there’s a 65% probability of a 25-point rate hike in May, an increase from 48% a week before. Now that the employment data is out of the way, the emphasis shifts toward the US CPI statistics that are expected on Wednesday.
Key Data for the Week Ahead
Monday, banks across several European countries will be closed due to the Easter Holidays, which will probably affect volatility.
The most important day of the week will be Wednesday when the U.S. inflation data comes out. The year-on-year Core CPI is anticipated to be 5.6% compared to 5.5% in February, while the monthly Core CPI change is expected to be 0.4% versus 0.5% previously. We will see how this change will affect the Fed’s policy going forward. The data is set to come out at 12:30 pm GMT.
Later in the day, at 6:00 pm GMT, the Fed Minutes will come out, offering details about the latest FOMC Meeting and the reasons that influenced the rate vote.
Thursday at 12:30 pm GMT we take a look at the U.S. Producer Price Index and the Unemployment Claims. The last important release of the week will be the U.S. Retail Sales, scheduled for Friday at 12:30 pm GMT.
Technical Outlook – EUR/USD
The greenback strengthened after the NFP release but the impact was lower than at other times. It seems like the bulls are having trouble surpassing the key resistance at 1.1000 and we may see a double top forming.
Price action this week will be heavily affected by the Consumer Price Index and the rest of the data but keep in mind the market is thin due to the Easter Holidays. The last couple of trading days lacked volatility despite the U.S. labor data, which solidifies the ‘thin market’ point.
The Relative Strength Index looks to slow down, indicating that bullish momentum is fading. On top of this, the US Dollar got a boost from the better-than-anticipated NFP and the effects will likely spill into this week’s price action. The first notable support is located at 1.0775 while resistance sits at 1.1000.
