– The March US Change in Nonfarm Payrolls report is due on Friday at 12:30 GMT.
– Markets are expecting the weak February print of 20K to be a one-off; consensus calls for 170K.
– Retail traders are selling the US Dollar, despite significant gains over the past week-plus.
Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
04/05 FRIDAY | 12:30 GMT | USD Change in Nonfarm Payrolls & Unemployment Rate (MAR)
The main issue for the US Dollar when it comes to the March US Nonfarm Payrolls report is whether or not the US labor market rebounded after the US government shutdown. After all, the February reading was a meager 20K.
But with the unemployment rate still near cycle lows at 3.8%, there is still evidence that the labor market remains tight by the FOMC’s standards. Market participants are expecting that March reading will show a strong rebound, given that jobless claims remain low.
Accordingly, current expectations for the data are calling for the unemployment rate to hold at3.8%, and for the headline jobs figure to come in at +170K. Wage growth is expected to remain at its 10-year high of 3.4% y/y as well.
According to the Atlanta Fed Jobs Growth Calculator, the economy only needs +111K jobs growth per month over the next 12-months to sustain said unemployment rate at its current 3.8% level.
EURUSD Price Chart: Daily Timeframe (May 2018 to April 2019)
EURUSD has been on a losing streak since the Fed’s March meeting, falling all but one day since March 20. Momentum is firmly to the downside right now, with price squarely below the daily 8-, 13-, and 21-EMA envelope in sequential order. Likewise, daily MACD and Slow Stochastics are trending lower, with the former having crossed below its signal line last week; the latter is nearing a sell signal. A test of the yearly low at 1.1176 is not out of the question by the end of the week (nor would be a break to fresh yearly lows).
IG Client Sentiment Index: EURUSD (April 4, 2019)
Retail trader data shows 72.2% of traders are net-long with the ratio of traders long to short at 2.59 to 1. In fact, traders have remained net-long since Mar 26 when EURUSD traded near 1.12738; price has moved 0.5% lower since then. The number of traders net-long is 1.7% lower than yesterday and 26.1% higher from last week, while the number of traders net-short is 10.5% higher than yesterday and 16.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
FX TRADING RESOURCES
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— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher, email him at [email protected]