Nonfarm Payrolls (NFP) in the US rose by 254,000 in September, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 159,000 increase (revised from 142,000) recorded in August and surpassed the market expectation of 140,000 by a wide margin.
Other details of the report showed that the Unemployment Rate edged lower to 4.1% from 4.2%, while the Labor Force Participation was unchanged at 62.7%. Finally, the annual wage inflation, as measured by the change in Average Hourly Earnings, rose to 4% from 3.9% in August.
"The change in total nonfarm payroll employment for July was revised up by 55,000, from +89,000 to +144,000, and the change for August was revised up by 17,000, from +142,000 to +159,000," the BLS noted in its press release. "With these revisions, employment in July and August combined is 72,000 higher than previously reported."
What to expect in the next Nonfarm Payrolls report?
Economists expect the Nonfarm Payrolls report to show that the US economy added 140,000 jobs in September, following a job gain of 142,000 reported in August.
The Unemployment Rate is expected to stay unchanged at 4.2% in the same period. Further, a closely-watched measure of wage inflation, Average Hourly Earnings, is seen increasing by 3.8% in the year through September, maintaining the pace seen in August.
The September jobs data could reinforce the markets’ expectations of a 50 basis points (bps) rate cut at the November meeting even though Fed Chairman Jerome Powell pushed back against such expectations during his speech at the National Association for Business Economics (NABE) Annual Meeting in Nashville on Monday.
How will US September Nonfarm Payrolls affect EUR/USD?
In the run-up to the US NFP data release, markets are pricing in about a 37% chance that the Fed will lower rates by 50 bps in November, down from 53% seen at the start of the week.
Amidst fading bets for a large Fed rate cut in November and escalating conflict between Iran and Israel, the US Dollar sustains its recovery from over one-year lows against its major rivals.
The mixed Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) data and JOLTS Job Openings data failed to alter the market’s pricing for November’s rate cut move.
The ISM announced on Tuesday that its headline US Manufacturing Index steadied at 47.2 in September and remained deep in contraction while below the 47.5 forecast. US Job Openings rebounded to a three-month high in August, arriving at 8.04 million after declining to 7.71 million in July.
If the headline NFP reading shows a payroll growth below 100,000, it could suggest further cooldown in the US jobs market, and hence, reinforce the odds of a big cut in November. This could initiate a fresh US Dollar downtrend while pushing EUR/USD back to 1.1200.
Alternatively, a stronger-than-expected NFP figure alongside hot wage inflation data would fuel expectations that the Fed may opt for a 25 bps rate reduction, providing extra legs to the US Dollar recovery and smashing EUR/USD toward 1.0900.
The EUR/USD pair has breached the critical 50-day Simple Moving Average (SMA) at 1.1044 amid the renewed downtrend. The 14-day Relative Strength Index (RSI) points south well below the 50 level, currently near 44, suggesting that sellers are likely to retain the upper hand in the near future.
On a daily candlestick closing below the 50-day SMA at 1.1044, sellers will flex their muscles toward the 100-day SMA support at 1.0928. Further down, the 200-day SMA at 1.0875 will be the last line of defense for buyers. Alternatively, they need to recapture the 21-day SMA at 1.1102 to negate the bearish pressure in the near term. Further up, the year-to-date (YTD) high of 1.1214 will be tested en route to the 1.1250 psychological barrier.
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