Title: U.S. Dollar Tumbles Following Disappointing Non-Farm Payrolls Report: In-Depth Analysis on Major Forex Pairs
Author: Adapted and expanded from an original article by James Hyerczyk for FX Empire
The U.S. dollar came under significant pressure following the release of a weaker-than-expected non-farm payrolls (NFP) report for June 2024. Currency markets reacted strongly to the data, pushing the dollar lower against major forex counterparts as traders recalibrated expectations for the Federal Reserve’s monetary policy trajectory. This article takes a deep dive into the implications of the latest labor data and breaks down technical and fundamental analyses of the EUR/USD, GBP/USD, USD/CAD, and USD/JPY currency pairs.
Summary of the U.S. June 2024 Jobs Report
The June 2024 U.S. jobs report, released by the Bureau of Labor Statistics, fell short of economists’ expectations and highlighted growing concerns about the resilience of the labor market. Here are the key takeaways:
– Total non-farm payrolls rose by just 206,000, missing consensus forecasts of approximately 220,000
– The unemployment rate unexpectedly increased to 4.1%, up from 4.0% the previous month
– Average hourly earnings rose by 0.3% month-over-month, in line with forecasts, but annual wage growth slowed to 3.9%
– Labor force participation rate increased slightly to 62.6%
– Revisions to the previous two months’ data showed 111,000 fewer jobs than initially reported
While job additions remained positive, the cooling pace, combined with rising unemployment and downward revisions, suggests a labor market that may be losing momentum. This soft patch in employment strengthens expectations that the Federal Reserve might pivot toward a more dovish stance later in the year, potentially lowering interest rates to sustain economic growth.
Immediate Market Reactions
– The U.S. Dollar Index (DXY) tumbled below the critical 105.00 handle, further eroding its recent gains
– U.S. Treasury yields declined sharply, as bond markets began pricing in increased odds of a Fed rate cut before year-end
– Equity indices advanced modestly, fueled by growing expectations of monetary easing
– Gold prices rallied above $2,370 per ounce, benefiting from a weaker dollar and lower yields
Let’s now examine how each of the major currency pairs responded to this pivotal data release.
EUR/USD: Euro Breaks Higher Above 1.08
The euro gained significant ground against the dollar in the wake of the NFP report. The EUR/USD soared past the 1.0800 psychological level and is now targeting the short-term resistance zone around 1.0880–1.0900.
Key Technical Levels:
– Immediate resistance: 1.0880–1.0900
– Higher resistance target: 1.0960
– Key support: 1.0800, then 1.0710
Technical Outlook:
– The pair is trading well above the 50-day and 200-day moving averages, confirming a medium-term shift toward bullish momentum.
– Daily RSI has risen above 60, suggesting increasing bullish strength though not yet in overbought territory.
– A close above 1.0900 could open the door for a move toward the April highs near 1.0960.
Fundamental Analysis:
The European Central Bank (ECB) has signaled a wait-and-see approach after initiating a rate cut in June. Unlike the Fed, the ECB is more cautious due to persistent inflation in some eurozone countries such as Germany and France.
If the U.S. labor market continues to weaken and the Fed signals rate cuts ahead of the ECB, the EUR/USD could benefit from diverging monetary policies. Traders will continue to focus on upcoming U.S. CPI and PCE inflation data while keeping an eye on European PMI numbers for clues.
GBP/USD:
Read more on USD/CAD trading.