When is the US monthly jobs report (NFP) and how could it affect EUR/USD?

US monthly jobs report overview

Friday's US economic docket highlights the release of the closely-watched US monthly jobs data for August. The popularly known NFP report is scheduled for release at 12:30 GMT and is expected to show that the economy added 300K jobs during the reported month, down from the 528K in July. The unemployment rate, however, is expected to hold steady at 3.5% in August. Apart from this, investors will take cues from Average Hourly Earnings, which could offer fresh insight into the possibility of a further rise in inflationary pressures.

Analysts at TD Securities sounded more optimistic and wrote: “We expect the series to have continued to advance strongly in August (370K), but at a more moderate pace following the eye-popping 528K increase registered in July, which was a five-month high. We look for the solid gain in employment to also be reflected in another decline in the unemployment rate to 3.4% (second consecutive one-tenth decline). We are assuming an improvement in the participation rate to 62.2% after falling to 62.1% in July. We are also looking for wage growth to slow modestly to a still robust 0.4% MoM after registering an unexpected 0.5% jump last month. The MoM leap should result in a one-tenth increase in the YoY measure to 5.3% in August.”

How could the data affect EUR/USD?

Ahead of the key data risk, traders opt to take some profits off their US dollar bullish positions after the recent run-up to a two-decade high. This, in turn, pushes the EUR/USD pair back above the parity mark. A disappointing labour market report might prompt some long-unwinding around the USD, though the immediate market reaction is more likely to be short-lived. Growing recession fears and economic headwinds stemming from fresh COVID-19 lockdowns in China and the war in Ukraine should help limit any meaningful corrective slide for the safe-haven buck.

Conversely, stronger data will reaffirm expectations that the Fed will continue to tighten its monetary policy at a faster pace to tame inflation. This should be enough to push the US Treasury bond yields higher, alongside the USD. Apart from this, concerns over an extreme energy crisis in Europe suggest that the path of least resistance for the EUR/USD pair is to the downside and any attempted recovery could get sold into.

Eren Sengezer, Editor at FXStreet, offers a brief technical overview and writes: “EUR/USD has climbed above the 50-period SMA on the four-hour chart and the Relative Strength Index (RSI) indicator recovered toward 50 early Friday. Although these technical developments don't necessarily point to a bullish tilt in the near-term outlook, they show that sellers remain cautious for the time being.

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, 1.0000 (psychological level, 20-period SMA) aligns as immediate resistance ahead of 1.0020 (Fibonacci 23.6% retracement of the latest downtrend) and 1.0060 (100-period SMA). Supports are located at 0.9980 (50-period SMA), 0.9920 (end-point of the downtrend) and 0.9900 (psychological level).

Key Notes

  •  Nonfarm Payrolls Preview: Five reasons to expect a win-win release for the dollar

  •  NFP Preview: Forecasts from eight major banks, employment growth still strong

  •  EUR/USD Forecast: Can euro extend recovery on a weak NFP print?

About the US monthly jobs report

The nonfarm payrolls released by the US Department of Labor presents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure.