US NFP Preview: What to Expect of EUR/USD
The US Bureau of Labor Statistics will publish the results of the Non-farm Payrolls later in the NA session, with consensus expecting the US economy to have created 164K jobs during May and the unemployment rate to have ticked lower to 4.9% from 5.0%.
The job creation in the US economy has been experiencing an erratic performance since the start of the year, although it does not offset the good health of the labour market in general terms. However, wage growth is still showing signs of stagnation, having an impact on the prospects of the other pillar of the Fed policy, which is inflation.
In words of strategists at TD Securities, “There is a common realization that this particular payrolls report will be rather significant in solidifying expectations for a summer hike. The Verizon strikes complicates the interpretation of this report but even when we incorporate this into our payrolls estimate, we do not think it is substantially low enough relative to consensus to undermine the USD particularly with this expected to be given back at the subsequent report and our expectation for average hourly earnings to be decent”.
Regarding FX, EUR/USD remains on the defensive following yesterday’s post-ECB drop around 1.1150/40. A miss today in the report could see the interim resistance at 1.1220 re-visited, probably opening the door for a test of last week’s tops in the mid-1.1200s. On the other hand, recent lows in the 1.1100 neighbourhood could emerge as the initial support, followed by the critical 1.1060/50 band.