Will the surprising employment numbers in May affect the strengthening of the U.S. dollar? That is the primary topic of discussion of our comprehensive EURUSD analysis!
The U.S. labour market added fewer jobs in May than what was initially expected, which caused sharp tremors for the recovering greenback immediately following the release of the Bureau of Labour Statistics (BLS)'s latest labour survey.
Even still, headline unemployment fell to 5.8 per cent last month, below the consensus forecasts' estimation for a decrease to 5.9 per cent. This is the lowest level on record since the beginning of the coronavirus crisis, underpinning the robust recovery process.
As can be seen on the 4H chart above, the EURUSD rose sharply immediately after the BLS posted the weaker-than-expected non-farm payrolls for May. Nevertheless, the pair continues to be affected by growing bearish pressure, underpinned by the recuperating dollar.
This mounting bearish pressure is underscored by the emergence of a broad Descending Channel pattern. The price was able to break down below the 1.21700 support level, which had previously served as a prominent resistance level.
The latest upswing could potentially probe the newly formed resistance there, and yet another reversal from it seems highly probable. Nevertheless, a stronger pullback could test the channel's upper boundary, which is currently positioned above 1.21700.
In the first case, such a reversal could be followed by a subsequent depreciation towards the next major support at 1.20600. In the latter case, a breakout above the channel would likely confirm the termination of the downtrend and allow for a test of the closest resistance at 1.22400.
For the time being, the MACD indicator underpins the prevailing bearish momentum in the market.
The American economy added 559 thousand jobs last month, which is below the consensus forecasts for 645 thousand new positions.
However, there is a definite improvement in the labour market on a monthly basis when the latest data is contrasted against the massively disappointing 278 thousand new jobs that were added in April.