NFP April Review: US Jobs Bounce Back Sharply

The NFP official data for April was released and it came out much better than initially anticipated. This is an indication that the precious month’s discouraging data (which became even more dismal after a revision of Friday’s release) may have just been a minor setback in an otherwise positively trending US employment community. The total NFP employment for April has increased by 211,000 jobs which is significantly better than the expected figures of 190,000.

April’s unemployment rate is recorded at an all-time low for the past 10 years with the rate improving by dropping down to 4.4%. It has significantly reduced from last month’s 4.5% and against a projected earlier forecast of 4.6%. Average hourly earnings came in as expected at +0.3%.

Other interesting statistics came out on Friday from NFP though; the disappointing 98,000 March jobs was revised significantly and it went down to an even more disappointing figure of 79,000. Nonetheless, the April statistics which have been positive has led to a general optimistic outlook for the US economy by the Federal Reserve, which reiterated last Wednesday’s FOMC release, and translates to a likely and expected rate hike by the Fed in June.

US Dollar Initially Unimpressed

As we ended the first week of May, even with the positive statistics coming from the NFP on Friday, the USD was still left unimpressed. The greenback spiked briefly and fell back almost immediately against most of its major currency counterparts after the NFP release. The USD remained stable after this drop even though it is still under pressure.

Friday’s positive NFP news can help provide some support for the currently under-pressure USD going forward from now. Commodity currency pairs such as the AUD/USD and USD/CAD have been falling very sharply against the USD as metal and oil prices sink low.

Anticipation of Macron Pushed EUR/USD High

In anticipation of the French second round election coming up by the weekend, the expectation of a Macron win caused a surge in the Euro, who is an EU-friendly candidate. As expected, as the results of the election became apparent, the Euro spiked as expected in the scenario of a Macron win, since Macron is a strong supporter of the EU and Euro.

The spike did not sustain the move and the Euro has dropped significantly from its 6-month high of 1.1020 down to a low of 1.0924

This just reaffirms what we always say, the markets tend to “buy the rumor and sell the news”. The expectation of a Macron win was high and the markets already bid and bought the rumor before the election. When the election results were as expected, the Forex market had already digested the results of the vote and priced-in the outcome, and so there was nothing to react to.

USD Index

The USD Index touched 98.47, its lowest level for 2017 so far. In doing so, it spilled a past major support level of 98.70. Now remember if a move past a major support is not breached with enough momentum to break out, what tends to a happen? A rebound. That is exactly what happened in Monday’s trading session as we see the USD rebound from its yearly low and at the time of writing this article the USD Index is sitting at 99.12.

In view of last week’s positive data and the hawkish outlook by the Fed, as well as general seasonal USD strength – the greenback has strengthened 10 out of 12 years in May – it is more likely to expect the greenback to sustain a continued higher move in the weeks ahead.

On the other hand, if an event or data release pushes the greenback down below the USD Index support of 98.70 with enough momentum to sustain the move, then we could see a continued drop in the USD.

Regardless of the outcome, the ForexSignal trading team is monitoring the market and is ready to adjust and adapt to the constantly changing trading conditions and we look forward to Forex signals in the month ahead.