- The US Dollar is still interesting and attractive to investors, despite the statistical fluctuations.
- The US labor market statistics in September was surprising, but not as impressive as it might have been.
- Improvements in the Unemployment Rate and the Average Hourly Earnings will allow the US Federal Reserve to tighten its monetary policy.
The first October week was quite effective for the American Dollar. The main currency pair updated the low at 1.1668 it reached on August 17th and then was corrected bit, but made perfectly clear that there might be more declines. If there is a reason, the "bears" will come quickly.
The US labor market statistics in September is astonishing. The numbers were expected to be quite high, but the market was really surprised by the readings it saw. The Unemployment Rate was 4.2% in September after being 4.4% the month before. This is the lowest value of the indicator since 2001, over 16 years. It’s highly unlikely to be a mistake: the Participation Rate increased up to 63.1% against 62.9% in August. It appears that the labor market is really feeling good.
Another positive thing is the growth of the Average Hourly Earnings. In September, it expanded by 0.5% m/m after adding 0.2% m/m in the previous month and against the expected reading of 0.3% m/m. On YoY, the indicator increased by 2.9%. That’s a very good result.
However, this is where good news ended. The Non-Farm Payrolls decreased by 33K, although it was expected to expand by 82K after adding 169K the month before. The report says that the decline in some industries likely reflected the impact of hurricanes Irma and Harvey, which made the country nervous last month. But if one takes a closer look at the NFP numbers published in July and August, one can see that the indicator was revised downwardly twice. If one adds the September reading to this period of time, the overall picture won’t be very promising. Still, the fact that the US labor market is usually pretty stable makes all above-mentioned numbers look not so horrible. It means that the September decline will be eliminated in October or November, unless there are some serious stresses of course.
The Unemployment Rate and the Average Hourly Earnings data shows that the inflation in the USA is rising. This, in its turn, supports the Federal Reserve in its intentions to tighten the monetary policy. After they published the September reports on the employment, expectations relating to the key rate increase in December 2017 increased up to almost 80%, according to the CME futures. This was the reason why the USD rose.
The best way to see investors’ attitude to the USD is the EUR/USD pair behavior. Let’s take a look at the H4 chart, which shows the downtrend. The key element of the current movement is the price’s consolidating around the support level, and one of the most possible scenarios implies that it may return to the upside border of the descending channel. One of the targets close to the resistance level is the retracement of 61.8% at 1.1875. If this scenario continues, we can expect the price to rebound from the upside border and resume falling to reach 1.16. also, we shouldn’t exclude a possibility that the instrument may break the current resistance level and start forming a new rising impulse. The main short-term target of this impulse will be the local high at 1.2092.
