EUR/USD fell after a blockbuster US jobs report boosted the dollar, but the pair held a key support level and rebounded. Traders now await next week's inflation data, which is seen as a bigger test for the Federal Reserve's September rate decision than Friday's payrolls.
EUR/USD dropped below its 100-hour moving average at 1.1602 as the dollar strengthened after Friday's US jobs report. But the decline stalled near the 38.2% retracement of the move up from the late-July low, at 1.1573, and sellers could not push the pair through that level.
Buyers stepped back in, sending EUR/USD back toward the moving average. The 100-hour average at 1.1602 is now the level to watch: sellers keep the short-term advantage below it, but a move back above it could trigger short covering and a further move higher.
Payrolls beat forecasts by a wide margin
Nonfarm payrolls jumped to 162,000 in August, nearly three times the 58,000 consensus, up from a revised 21,000 in July. June and July payrolls were revised up by a combined 55,000, which eased concern that July marked the start of a deeper labor-market slowdown. Unemployment held at 4.1%, while average hourly earnings rose 0.3% month over month and 3.1% year over year.
Fed rate odds barely move despite the beat
Yet September Fed hike odds only edged up to around 60%, because Fed Governor Christopher Waller had tied his decision to whether disinflation proves durable rather than to labor-market strength. Friday's report answered July's labor-market question, not September's inflation question that Waller's framework depends on. Neil Birrell, chief investment officer at Premier Miton, said "A hike in rates just became a bit more likely."
CPI report becomes the next test
Inflation is running at 3.4% over the past 12 months, above the Fed's 2% target, so next week's August CPI report now carries more weight for the September 15-16 meeting than Friday's payrolls. A hotter print would combine with the strong jobs data to push rate hike odds higher, while a softer reading could revive the case for holding rates steady.
Sources: investinglive.com, ActionForex, BBC News
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