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EURUSD Higher on Negative NFP, Tests Trend Line Resistance. More Gains Ahead?


Now that tensions between the US and Iran have subsided, economic data is now back in front and center of market attention. EURUSD scored its first winning day in four consecutive trading days last Friday as it closed 16 pips higher at 1.1120, after the disappointing US NFP data.

December NFP Disappoints

According to the Bureau of Labor Statistics, there were 145,000 jobs generated in December. This was lower than what was estimated at 162,000 and additionally, the reading for November was revised lower. It was initially reported that 266,000 jobs were added during the month but was updated to only 256,000. Average hourly earnings also fell short of forecast which was for a 0.3%. It only printed a measly 0.1% uptick. However, we did see an upward revision to November’s reading from 0.2% to 0.3%. The unemployment rate, on the other hand, came in as expected at 3.5%.

Miss in Hourly Earnings Cause for Concern?

Of course, the misses in the highly-anticipated employment report raised concerns about the resilience of the US labor market. Although job growth remains healthy, the bigger worry is on the slowdown in average hourly earnings. On an annualized basis, average hourly earnings only grew by 2.9% which is the lowest uptick we have seen since July 2018. This is not good news for the dollar because lower earnings translates to lower consumer spending and consequently, slower economic growth.

A Quiet Day Ahead for EURUSD

For today, there are no reports due for release from both the US and the euro zone. Asian session traders will likely only be able to digest the news from last week’s NFP today. This would explain the rise in EURUSD in this morning’s trading. For the rest of the day, however, the currency pair will be vulnerable to market sentiment. If there are no hard-hitting headlines on geopolitics today, we may see limited movement on EURUSD.

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EURUSD Outlook

On the 4-hour time frame, it seems that the short-term uptrend on EURUSD is no longer valid. (However, the long-term trend line I pointed out over the weekend still looks good.) By connecting the lows of November 29, December 20, and December 24, we can see that the currency pair is already trading below the trend line. In fact, EURUSD may now find resistance at the broken trend line. This price, around 1.1125, also coincides with the area between the 23.6% and 38.2% Fib levels (when you draw the Fibonacci retracement tool from the high of January 6 to the low of January 10). Reversal candles around this level could mean that EURUSD may soon fall to its December 23 lows at 1.1067.

On the other hand, a strong close above the trend line and 38.2% Fib levels may mean that there could be enough buyers to push prices back up to their January 6 highs at 1.1205.

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