Positive US Jobs Report, USD Retracement Begins?

Aug 06, 12:31 pm

The US Jobs Report came in with a positive surprise across the board, most of the numbers came in higher than expected, despite the fact that many of the employment components that were released for the past few weeks were pointing to a possible slowing down.

NFP Above 200K

The Non-Farm Employment Change came in above the estimates, adding 209K in July compared to 183K estimated. June’s data has been revised higher to 231K instead of 222K. This is the second higher reading since February of this year.

Moreover, the Private Payrolls added 205K which is also higher than the 178K estimates.  This is the highest reading since February of this year. In addition, the Manufacturing Payrolls added more than 16K. This is the highest reading since February and the second monthly increase in a row.

Unemployment Declines Back

The Unemployment rate ticked lower once again to 4.3% compared to 4.4%, in line with the market estimates. However, this time, the Participation Rate ticked higher to 62.9% compared to 62.8%, which seen as a positive signal, unlike the previous months, when the unemployment rate was going down declining on declining participation rate.

Higher Wages

One of the most important factors in today’s report was the wages growth. The MoM Average Hourly Earnings increased by 0.3% in July in line with the market estimates. This is also the biggest monthly increase since February of this year.

Another positive signal came in from the YoY Average Earnings, which stabilized around 2.5% in July, despite the fact that the estimates were to slow down back to 2.4%. Yet, it remains near the lowest level since the beginning of this year.

Rate Hike Odds Increased

This is one of the most clearest Jobs Report this year. The entire dataset is positive and higher than previous estimates.

Such figures bring back the chance possibility of another rate hike this year, possibly in September or December.

The Fed Fund Futures are pricing in one more rate hike in December with 51% chance only. We know that this might change in the coming weeks based on the economic releases. Yet, it seems that the market is now pricing in such possibility.

USD Index Recovered Right From Its Key Support

Remember when we talked about the US Dollar Index key support area on the weekly chart? We noted that the Index is now trading within a long-term support area, between 93.0 and 91.80.

This area has been supporting the US Dollar Index since 2014 until today. If you look at this week’s candle until this report is released, its showing signs of reversal, which might be the beginning of the upside retracement

You have been warned before not to rush and short the US Dollar this week, despite the fact that it was declining since the beginning of this week. However, it recovered the entire loss at the end.

In the meantime, we will keep an eye on the Index over the next few days, as the upside retracement is likely to remain limited below 94.50’s and or 95.0 for now.

 
Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.