In the weekly review, we wrote that the US economic data last Friday was great. If you look at the headline it seems mixed because the unemployment rate increased to 5.7% from 5.6% the previous month, which is very close to FED`s 5.5% goal anyway. On the other hand, the participation rate increased also, from 62.7% to 62.9%, so it eliminates the negative impact of the 0.01% jump in unemployment. Apart from that, the non-farm employment numbers came out above expectations. But the most important piece of data was the hourly earnings month-on-month. Last month´s earnings declined 0.2% while January´s earnings/wages increased 0.5% and that´s a really strong number.
The hourly wages data is very important right now because that´s the only component that was lagging during the US economic recovery. This was the reason for the delay in the interest rate hikes and it was mentioned in every FED statement. Now the dovish members of the FED don´t have any more reasons to oppose a possible rate hike in June/July, that´s why the US Dollar rallied after the data on Friday.
So, how are we going to play this?
Well, we went long on the USD after the data and got some nice profit. We issued a long term EUR/USD sell signal at 1.1384 with an 80 pip profit target but closed it with only 5 pips profit. We hope that you kept that trade open because it hit the profit target last night. We opened a couple of short
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