Dollar Not Bothered by Disappointing Headline NFP

Dollar edged lower immediately after a weaker-than-expected employment report today but quickly recovers.
NFP increased 111k jobs in Jan, much below expectation of 149k. Unemployment rate also edged higher to 4.6% from 4.5%. Average hourly earnings rose 0.2% mom, 4.0% yoy, below expectation of 0.3%, 4.1%, suggesting that wage pressured was relatively contained. However, the negative effect was offset by strong upward revision in Dec’s number from 167k to 206k. The total of the last two months’ job growth is 317k, which is similar to original expectation of 316k (167k in Dec and 149k in Jan).

U of Michigan consumer confidence and Dec factory orders will be featured next.


Daily Pivots: (S1) 1.2999; (P) 1.3025; (R1) 1.3048;


Despite edging higher to 1.3062, EUR/USD still failed to break through mentioned 1.3052/57 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057) decisively. Subsequent retreat has pushed EUR/USD to below 1.3001 minor support, indicating a temporary top should be formed and intraday bias now shifted back to the downside.

But still, a break below 1.2923 support is needed to indicate the consolidation from 1.2865 has completed and bring retest of this low and trend line support at 1.2842. Otherwise, another rally cannot be ruled out. Also, break trend line support will confirm that whole fall from 1.3364 has resumed for next downside target of 1.2760 support.

In the bigger picture, an important medium term top could be in place at 1.3364 already, with bearish divergence condition in weekly MACD and RSI. Sustained break of 1.2760 support, which will also have medium term rising channel line (now at 1.2748) taken out too, will add much weight to the case that whole medium term up trend from 1.1639 has completed. Focus will then be on 1.2483 cluster support (50% retracement of 1.1639 to 1.3364 at 1.2502). Decisive break of 1.2483 cluster support will confirm this case and have medium term outlook turned bearish.

However, sustained break of 1.3052 cluster resistance will indicate the fall from 1.3364 has possibly completed. Further rally should then be seen towards next resistance zone of 61.8% retracement of 1.3364 to 1.2865 at 1.3173 and falling trend line resistance (1.3364 to 1.3296, now at 1.3190.). Also this will suggest the rise from 1.2483 has possibly resumed and EUR/USD could make a new high above 1.3364 before finally making a top on above mentioned bearish divergence condition in weekly chart.

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Shing-Ip Tsui is the founder and CEO of ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.