Article Highlights

  • US NFP report: 142K vs. 201K expected, 136K previous
  • US August NFP revised lower from 173K to 136K
  • US unemployment rate: 5.1% as expected and previous
  • US labor participation rate down from 62.6% to 62.4%
  • US average hourly earnings: 0.0% vs. 0.2% expected, 0.4% previous
  • US factory orders: -1.7% vs. -0.9% expected, 0.2% previous
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Now you see it, now you don’t! Forex traders dumped the dollar across the board after receiving an onslaught of weak jobs data from Uncle Sam. Let’s break down the numbers.

The Greenback took a quadruple roundhouse kick from the markets after the U.S. printed dismal employment data. If you recall, Janet Yellen and her gang have been saying that they’re looking at jobs numbers (among other things) for direction on their rate hike schedule.

The headline non-farm payrolls report clocked in at 142K (vs. 201K expected), which is bad enough if not for August’s figure also getting downgraded by almost 40K. Next, the unemployment rate steadying at 5.1% might not be such a drag if not for the labor participation rate dropping from 62.6% to 62.4%. For trading newbies out there, a drop in participation rate usually means that the improvements – or in this case steadying – of unemployment rate came from workers leaving the labor force rather than finding jobs.

Even average hourly earnings weighed on the dollar by stagnating instead of rising by 0.2% as market players had expected. The cherry on top of the dollar bears’ sundae was factory orders coming in at -1.7% when analysts had been estimating only a 0.9% downtick from last month’s 0.2% increase. Yikes!

Not surprisingly, the dollar fell hard and fast at the disappointing figures. Luckily for the bulls though, the move didn’t last long and even inspired a bit of retracement among dollar pairs. One possible reason is profit-taking after the big event. Another is the dollar getting a boost from a good intraday run of U.S. equities and risk appetite. After all, now that the Fed is less likely to raise rates in October, U.S. companies could enjoy borrowing money at lower rates for longer.

EUR/USD rocketed by a whopping 158 pips (+1.42%) to an intraday high of 1.1318 before settling back down to 1.1203 while USD/JPY also broke below 119.00 and touched 118.69 before closing at 120.10. USD/CHF saw a similar move with its 143-pip drop (-1.47%) to .9645 before settling back up to .9722. Meanwhile, GBP/USD finished the day with gains for the first time in days. The pair popped up by 77 pips (+0.51%) to 1.5238 before ending the day back down to 1.5180

The other higher-yielding currencies also reflected the dollar’s weakness and its attempt at getting back some pips. AUD/USD even fell from a session high of .7065 to a low of .7003 before closing with a 15-pip gain (+0.21%) to .7044 while USD/CAD fell steadily from 1.3241 to 1.3165.

Will we see more dollar weakness from Asian session forex traders? China’s markets are out on National holiday but we will be seeing Australia’s ANZ job ads at 12:30 am GMT, followed by Japan’s average cash earnings report at 1:30 am GMT. These releases don’t usually cause sustained moves on the Aussie and yen respectively, so you might want to focus on overall risk appetite and dollar price action instead.

Good luck and good trading this week!

See also:

London Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

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