A1 Trading Company

Ticker tape by TradingView

August 6, 2021

What's Next For The USD After Friday's NFP Report?

Bart Kurek

On Friday the 6th of August, the US printed their monthly Non-Farm Payroll numbers, and this was a huge one!

The US Bureau of Labor Statistics reported today that the total non-farm payroll employment rose by 943,000 in July, and the unemployment rate declined by 0.5% to 5.4%. Notable job gains occurred in local government education, leisure and hospitality, and professional and business services.

Employment Change

Unemployment Rate

Average Hourly Earnings

The USD found fresh bidding interest in the wake of a strong US employment report for July. Non-farm payroll came in at 943K for July, which is better than the 870K the market was expecting and an improvement on the previous month's 938K. The US unemployment rate fell to 5.4% in July, beating analyst expectations for a decline to 5.7% from June's 5.9%.

The US average hourly earnings for all employees on private nonfarm payrolls increased by 11 cents to $30.54, following increases in the prior 3 months. Average hourly earnings for private-sector production and nonsupervisory employees also rose by 11 cents in July to $25.83. The data for recent months suggest that the rising demand for the labour associated with the recovery from the pandemic may have put upward pressure on wages.

The Fed should feel pleased with the pace of the recovery in the labour market. Wages are rising and house prices are booming, so it will become increasingly difficult to justify the very loose stance of monetary policy. Financial markets should be prepared for more communication in a gradual tapering in bond purchases in the fourth quarter.

Will Jobs Gains Prompt the Fed to Ease Stimulus?

The stronger rise in non-farm payrolls and the upwards revision to previous months' gains indicates that employment growth has shifted into a higher gear and that the drag on hiring from labour shortage is easing. This suggests that economic growth may be holding up better than we had feared and leaves open the possibility of Fed Chair Powell dropping a stronger hint that tapering is on the way.

However, some argue that still with 5.7 million fewer Americans employed than before the pandemic, it's too early to contemplate tightening policy or to pull back on the reins of fiscal policy. Instead, policymakers should fix their gaze on a full recovery and on raising US economic productivity for years to come through significant infrastructure investments.

We know the Fed is now using employment as their primary mandate for policymaking. Stay tuned into the upcoming FOMC events where we will see whether they will hint tapering soon.

Impact on XAU/USD:

Gold prices did not stand a chance following this very strong non-farm payroll report, falling 2.2% today. This employment report was terrible for gold as it did not support needs for safe havens and given a good chunk of the wage gains is from low-paying jobs, it did not do much for driving inflation hedges.

It's likely we could see further downwards pressure as Fed tapering bets grow following this strong NFP report. Price has once again gone underneath the long-term channel's top and is actually hovering around a key horizontal level at 1765.

If price will use this level as support, we could see price reach lows at the bullish order block at around 1740, however, if price breaks this zone we could see it tumble towards the psychological 1700 level.

A1 Edgefinder

#1 Market Scanner Tool
Take 10% off using code "READER"
GET ACCESS NOW
Want to See Our Trades?

Join The VIP Community!

Our entries, exits & analysis
Live Webinar Coaching
Trading Chatrooms
Strategy Library 
Exclusive Trading Guides
Use Code "READER" for 10% OFF!
JOIN NOWJoin FREE Discord
Listen to More Episodes
Even More Bullish USD News

This morning at 8:30 am Eastern Time, the United States’ Bureau of Economic Analysis released even more bullish USD news. The Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices for consumers (excluding volatile food and energy prices), rose more than expected month-over-month. A 0.5% increase was expected for August, with 0.6% […]

Read More
Historic Peril for the Pound

A strange series of events recently sent the United Kingdom’s Pound Sterling tumbling to historic lows. Just weeks after the death of Queen Elizabeth II (a head of state who was uniquely well-liked among the UK’s population by contemporary standards) Kwasi Kwarteng, Britain’s new chancellor in recently appointed Prime Minister Liz Truss’ administration, issued a […]

Read More
Get Ready for the Bear Market

Last week’s selloff was brutal for investors in the US stock market: the Dow Jones Industrial Average closed at its lowest level since late 2020, falling to 29590.41, losing 1.6% on Friday alone. With the S&P 500 currently down a whopping 23% from January’s highs this year, and other indexes close behind percentagewise, stock market […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
VIP
Menu
homesmartphonelaptopmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram