The Dollar Rebound Stalls After Weak NFP Data

Disappointing U.S. Jobs Data Hinders Greenback’s Recovery

by Bogdan Giulvezan

Friday the US Dollar took a blow from poor US jobs data, as the Non-Farm Employment report showed that only 49K new jobs were added during the previous month, while the prediction was 85K. Even worse, the previous report was revised from -140K to -227K, which further weakened the US Dollar and drove the EUR/USD pair above the key S/R level located at 1.2000.

Greenback’s recovery that started at 1.2350 may be in danger, but on the other hand, the recent pullback could be just a normal market behavior after an extended move south. The week ahead is not particularly busy in terms of economic releases, thus the emphasis will be on the technical side, but nonetheless, let’s take a look at the data that may have an impact on the pair.

Key Events for the Week Ahead

The first couple of days are rather lackluster, with nothing major on the horizon but the action picks up Wednesday with the release of the US CPI (Consumer Price Index) and Core CPI, scheduled at 1:30 pm GMT.

The reports show the change in the price that consumers pay for a basket of goods and services and act as a gauge of inflation because consumer prices are a key ingredient for currency valuation. The Core version excludes food and energy from the calculation and usually, the FOMC pays greater attention to this version, thus its importance to traders is greater as well. The CPI is expected to post a 0.4% change while the Core version is estimated to show a 0.3% change. Numbers above expectations usually strengthen the US Dollar.

Later in the day, at 7:00 pm GMT, Fed Chair Powell is scheduled to speak at an event hosted by the Economic Club of New York. It is unclear how the speech will affect the currency but it’s always wise to be aware of such events.

Thursday at 10:00 am GMT, the European Commission will release the EU Economic Forecasts, which is a report focused on economic projections for the next 2 years. The impact is not substantial unless the report contains major surprises.

The US Unemployment Claims come out the same day at 1:30 pm GMT but this is weekly data and tends to have a low impact on the greenback. However, lower numbers than the anticipated 775K can have a positive effect.

Chart Analysis – EUR/USD

The US Dollar halted its assault and the pair bounced higher after the disappointing US jobs data posted Friday. In doing so, it created support at 1.1950 and moved above 1.2000 which may become support once again.

The 50 periods Moving Average (blue) is below the 200 periods Moving Average (red), indicating a bearish environment, thus it’s likely to see another move below 1.2000. This scenario is also supported by the fact that price is approaching the 50 MA and the resistance at 1.2060, which may act in conjunction, forming a confluence zone that is usually a hard-to-cross barrier. As long as the pair is trading below this resistance zone, the bias remains bearish.