USD Advance in Danger After Soft NFP Report

The USD has been bullish for three weeks, as the data showed improvement, but the NFP report sent the DXY lower on Friday

Skerdian Meta•Saturday, August 5, 2023•2 min read

The USD has been bearish since October last year as the FED led the rate hike cycle among major banks and markets were holding the idea that they would be the first to stop rate hikes. The USD index DXY has been on a bearish trend since then and it even broke the support zone around 101 points, dipping below 10 points as well, for a short time.

Although we saw a bullish reversal by the middle of last month, which has pushed the DXY index higher again, and Powell also supported the bullish momentum, as he brought back the idea of the next hike connected to the economic data. The labour sector has shown tightening, with several employment reports coming in pretty strong, such as the last two ADP reports, which has encouraged USD buyers further.

Although, yesterday’s Non-Farm-Employment report came in on the soft side, which send the DXY and the USD down. EUR/USD surged above the major figure of 1.1000 after that report, almost erasing all the weekly losses, and closing the week in an upbeat tone.

July 2023 US employment data from the non-farm payrolls report

July non-farm payrolls +187K vs +200K expected
Prior was +209K (revised to +185K)
Two-month net revision -49K vs -6K prior
Unemployment rate 3.5% vs 3.6% expected
Prior unemployment rate 3.6%
Participation rate 62.6% vs 62.6% prior
U6 underemployment rate 6.7% vs 6.9% prior
Average hourly earnings MoM +0.4% vs +0.3% expected
Average hourly earnings YoY 4.4% vs +4.2% expected
Average weekly hours 34.3 vs 34.4 expected
Change in private payrolls +172K vs +179K expected
Change in manufacturing payrolls -2K vs 5K expected
Household survey +268K vs +273K prior
Birth-death adjustment +290K vs +26K prior

The headline indicates that the Federal Reserve desires a gradual decrease in economic activity. However, the increase in wages poses a concern, and such a factor is unlikely to counteract the upward movement in Treasury yields. The DXY stopped climbing since Thursday though and Friday looks like a confirmation of a bearish reversal, with the 100 SMA (green) acting as resistance.

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EUR/USD

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.