Title: U.S. Dollar Surges Following Strong Non-Farm Payrolls Report: In-Depth Forex Analysis on EUR/USD, GBP/USD, USD/CAD, and USD/JPY
Original article by Vladimir Zernov for FX Empire.
The U.S. dollar surged on Friday following the release of a stronger-than-expected U.S. Non-Farm Payrolls (NFP) report, which intensified expectations that the Federal Reserve will maintain higher interest rates for longer. The greenback touched new highs against major currencies as investors adjusted their positions based on the robust labor market data.
This comprehensive analysis explores how the latest jobs report has influenced key currency pairs, including EUR/USD, GBP/USD, USD/CAD, and USD/JPY. We also explore broader implications for forex markets and upcoming key economic indicators traders should monitor.
U.S. Non-Farm Payrolls Exceed Expectations
On Friday, the U.S. Bureau of Labor Statistics reported that Non-Farm Payrolls rose by 272,000 in May 2024, significantly outpacing the consensus forecast of around 180,000. Job gains were broad-based, reflecting strength in professional and business services, healthcare, and leisure and hospitality.
Key details from the report include:
– Non-farm payrolls: +272,000 vs. +180,000 expected
– Unemployment rate: 4.0% vs. 3.9% expected
– Average hourly earnings (YoY): +4.1% vs. +3.9% expected
– Labor force participation rate: 62.5% (declined slightly)
The combination of strong job growth and rising wages reinforced the notion that the U.S. economy remains resilient, increasing expectations that the Federal Reserve will delay rate cuts. This narrative provided a significant tailwind for the U.S. dollar across multiple pairs.
Market Reaction in Forex
The strong labor market print triggered notable moves in forex markets, especially in pairs involving the U.S. dollar. Here’s how the major currency pairs responded:
1. EUR/USD: U.S. Strength Meets Eurozone Weakness
The EUR/USD pair fell sharply following the NFP release, dropping below the 1.0800 support level. This decline was compounded by diverging central bank outlooks, as the European Central Bank (ECB) had just opted to cut rates.
Key factors influencing EUR/USD:
– ECB lowered interest rates by 25 basis points last week, its first rate cut since 2019.
– Fed officials remain cautious, emphasizing data-dependency before any rate policy shift.
– The European economy continues to stagnate, with weaker PMI numbers and inflation readings indicating softness.
Technical highlights:
– The pair breached the 50-day moving average near 1.0800.
– Next major support: 1.0725 and 1.0680 levels.
– Resistance now lies near 1.0850.
The divergence between the ECB’s dovish policy stance and the Fed’s hawkish bias has widened the interest rate differential, fueling downside pressure on the euro.
2. GBP/USD: Pound Struggles Ahead of U.K. Elections
GBP/USD also declined sharply after the jobs report, moving from near 1.2800 down to the 1.2700 area. The pair remains under pressure amid a lack of bullish catalysts from the U.K., as the country prepares for a general election on July 4.
Contributing factors:
– Britain’s economy remains sluggish, with modest GDP growth of 0.6% in Q1.
– The Bank of England has held rates steady but faces growing pressure to cut, particularly if inflation trends continue to soften.
– Political uncertainty surrounding the upcoming election adds a layer of risk premium to the pound.
GBP/USD technical analysis:
– Immediate support rests at 1.2670, followed by 1.2600.
– Resistance is forming around 1.2800 and 1.2850 zones.
Read more on USD/CAD trading.