The newest employment numbers in the U.S. show a growing discrepancy between headline unemployment and the pace of jobs creation. Can this shift in the U.S. economy affect the dollar in the short term? Find out more from our latest analysis of the greenback.
The Bureau of Labour Statistics (BLS) just revealed that the labour market had added fewer jobs in September than initially anticipated. The latest non-farm payrolls showed that the U.S. economy generated only 194 thousand jobs last month, missing the forecasts of 490 thousand. This has prompted volatility upsurges on the greenback.
As can be seen on the 4H chart above, the price action of the EURUSD has been depreciating within the boundaries of a major Descending Channel over the recent term. The sheer size of the Channel is an attestation to the strong bearish bias that has prevailed in the market so far.
However, the Bullish Engulfing candle that has started to develop following the release of the labour data, unless the price retreats abruptly, could potentially break the Channel. The bullish crossover in the underlying momentum was promptly picked up by the MACD indicator, which could be an early signal of a likely rebound.
The price action is about to probe the 20-day MA (in red) and the 50-day MA (in green). If it manages to close above the two, its next target would be the crossover between the upper limit of the Descending Channel and the 23.6 per cent Fibonacci retracement level at 1.16189.
A potential reversal from any of these thresholds would signal the likely continuation of the underlying downtrend, whereas a breakout above the upper limit of the Channel could then be followed by a new upswing towards the 38.2 per cent Fibonacci.
The concerning news is that the initial forecasts were projecting double the amount of new jobs compared to what the U.S. economy was actually able to achieve in September.
For comparison, Augusts' payrolls, which were an overall disappointment as well, grew by 235 thousand. The material difference between the two highlights decreasing pace of jobs creation.
Despite the disappointing payrolls data, headline unemployment surprisingly fell to 4.8 per cent, below market forecasts of 5.1 per cent and the 5.2 per cent that were recorded a month prior.