Summary:
- The NFP report faces seasonal challenges
- Fed to raise rates but US data important for guidance
- EURUSD defends the key barrier
The Fed will raise rates, so why does the NFP count?
That’s the first point – why traders should look into the report in the first place, given that a rate hike in September is a done deal? Well it’s true that it would take a true earthquake on the markets to derail the Fed from raising rates for the third time this year later this month and the NFP report is not going to change that. But the Fed will weigh US data against a turmoil on emerging markets when sending a guidance and here the NFP report is very important. So it’s still relevant for EURUSD traders.
NFP ahead of challenging August and September
On Friday at 1:30pm BST we will get the data for August and when we take a look at a 2011-2017 time series data for August and September has been historically weak. Technically the data is adjusted for seasonality but this adjustment must not be perfect. Anyway, the market sees an employment gain of 190k yet we see that an average August has been far weaker so far during this decade. In terms of wage growth, expectations are constant at 2.7% y/y. That would be the third straight month of this inconclusive dynamics (solid but not high enough to cause concern at the Fed) but do notice that in June and July of 2017 wages increased by 2.5% and this growth increased to 2.6% in August and 2.8% in September. That means that a hurdle for the next two reports will be higher (in other words, a disappointment is more likely than a beat).
August has been a weak month for the NFP so far during this decade. Source: Macrobond, XTB Research
EURUSD looking for its chances
At one point it looked as if EURUSD was back in a downtrend for good when a concern of Turkey’s impact on European banks saw the pair plunging below 1.13. However, the pair has fully recovered and at the monthly charts we have the 1.15 zone defended and what is more – rejected with a long shade. At present we can talk here about a transition from a resistance into a support.
A sharp turnaround on the MN candle could be a chance for the EURUSD. Source: xStation5
Will EURUSD seize this chane? At H1 interval we can see that the pair respects 1.1540 as a support as we had multiple test here. To surge higher, a resistance at 1.1715 needs to be broken.
1.1540 seems to be the key short term support on the H1 interval. Source: xStation5
