U.S. Dollar Tumbles Following Surprisingly Weak Jobs Report: In-Depth Analysis of Major Currency Pairs
By FXEmpire, adapted and expanded from original article by Jason Sen
(Original Article: https://www.fxempire.com/forecasts/article/u-s-dollar-dives-as-non-farm-payrolls-drop-to-22000-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1546498)
The U.S. dollar slumped sharply after the latest Non-Farm Payrolls (NFP) report showed a drastic slowdown in job creation in the United States. According to the Bureau of Labor Statistics, the U.S. economy added just 22,000 jobs last month, falling well short of economists’ forecasts that had anticipated around 185,000 new jobs. This sharp divergence from expectations triggered a wave of selling in the U.S. dollar across global forex markets.
Investors reacted swiftly to the data, reassessing their expectations for Federal Reserve interest rate policy and shifting into other currencies amid concerns over a potential slowdown in the U.S. labor market.
Here’s an in-depth look at how the NFP miss impacted key currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY, supported by technical levels and market sentiment.
Key Takeaways from the NFP Report
– Non-Farm Payrolls rose by just 22,000 jobs vs. a forecast of 185,000
– Unemployment rate remained largely unchanged at 3.9%
– Average hourly earnings rose 0.2% month-on-month, slightly weaker than expected
– Labor force participation rate was steady, but overall labor market momentum showed signs of slowing
Economic Signals & Market Implications
The sharp miss in job creation calls into question the underlying strength of the U.S. economy. For months, labor market resilience had been the cornerstone of the Federal Reserve’s argument for maintaining higher interest rates. However, this report undermines that thesis and has led traders to price in a more dovish outlook for future monetary policy decisions.
Bond markets reacted accordingly. Yields on U.S. Treasury notes fell, and rate futures markets began pricing in possible rate cuts later in the year.
Overview of Key Currency Pairs
EUR/USD: Euro Surges Past Resistance as Dollar Sinks
The euro rallied significantly against the greenback in response to the NFP release. The EUR/USD pair broke through a previous resistance level at 1.0810/20, triggering stop-losses and rallying to as high as 1.0895.
Resistance Levels:
– 1.0910 and 1.0930: Key areas to watch near-term
– 1.0970 and 1.1010: Additional resistance if bullish momentum continues
Support Zones:
– 1.0830/10: The breakout zone now serves as immediate support
– 1.0790/70: Buy signals may emerge here for short-term positioning
– 1.0750 and 1.0720: Key longer-term support zones
The bullish breakout needs to be sustained above 1.0830 for momentum to continue. A close above 1.0910 could push prices toward the 1.10 psychological level. On the downside, any dips toward the mid 1.07s could offer fresh buying opportunities, provided the broader dollar weakness remains.
European Central Bank Outlook:
Recent comments from ECB officials, combined with cooling inflation in the Eurozone, suggest that the ECB may cut interest rates over the next few months. However, the dollar’s weakness is overshadowing any European policy moves, giving the euro an upper hand.
GBP/USD: Pound Holds Gains as Market Embraces Risk
The British pound also benefited from the dollar’s decline, although gains were more restrained compared to the euro. GBP/USD currently trades near 1.2730 after breaking above resistance levels at 1.2700
Read more on USD/CAD trading.