Thu, Mar 23, 2023 @ 12:23 GMT
HomeContributorsFundamental AnalysisUS Non-Farm Payroll Disappoints, But The Rest Of The Report Is Solid

US Non-Farm Payroll Disappoints, But The Rest Of The Report Is Solid

Nonfarm payrolls rose by only 98k in March, data showed on Friday, far below the consensus of 180k. February’s print was revised lower to 219k from 235k previously. Nevertheless, the rest of the report was not as soft as the headline NFP print would suggest. The unemployment rate unexpectedly dropped to 4.5% from 4.7%, and for healthy reasons, considering that the labor force participation rate remained unchanged. Average hourly earnings were in line with the forecast of +0.2% mom, while last month’s print was revised slightly higher to +0.3% mom.

USD/JPY dropped on the below-expectations NFP print, breaking below the 110.35 (S2) hurdle to find support a few pips above the 110.00 (S3) territory. However, the rate rebounded in the following minutes as market participants digested the entire report. The pair recovered its losses and surged further, to find resistance near the key obstacle of 111.60 (R1). A clear break above that key level could signal the return of the rate back within the sideways range between that hurdle and the 115.50 zone, which contained the price action from the 11th of January until the 22nd of March. Thus, if the bulls manage to overcome 111.60 (R1), we could experience further advances in coming days. The rate could initially challenge the 112.20 (R2) territory.

Overall, this report keeps the door wide open for another near-term rate hike by the Fed in our view, perhaps as early as at one of the summer meetings. Recent comments from Chair Yellen suggest that NFP numbers in the range of 75k – 125k are still consistent with further tightening in the labor market, while the drop in the unemployment rate has brought it in line with the Fed’s target of full employment. Thus, we may well get some optimistic comments from FOMC officials regarding the strength of the labor market in the next days. The first of these remarks could come from Chair Yellen today. Any optimistic hints from the Fed chief regarding the US economy could enhance speculation regarding another near-term hike and thereby, bring USD under renewed buying interest.

EUR/USD declined in the aftermath of the employment data on Friday. The rate broke below two support (now turned into resistance) obstacles in a row and an upside support line taken from the low of the 3rd of January, before finding fresh buy orders near the 1.0570 (S1) level. In case we get some upbeat remarks from Chair Yellen today, we could see another test at the 1.0570 (S1) support. A clear break could set the stage for further declines towards the 1.0530 (S2) territory.

Today’s highlights:

During the European day, we get Norway’s CPI data for March. The forecast is for both the headline and the core rates to have ticked up. Something like that could diminish somewhat the likelihood for any further easing by the Norges Bank, which at its latest policy meeting shifted to a slightly more dovish tone, and thereby support NOK.

Besides Fed Chair Yellen, we have one more speaker on the agenda: ECB Vice President Vitor Constancio.

As for the rest of the week:

On Tuesday, we get CPI data for March from both the UK and Sweden. On Wednesday, all eyes will be on the Bank of Canada rate decision. The BoC is expected to stand pat. We see the case for the officials to keep the door wide open for a near-term rate cut if needed, despite the latest improvements in the profile for economic growth. In the UK, employment data for February are due out. On Thursday, we have a relatively quiet day, while on Friday, we get US CPI and retail sales data, all for March.


Support: 111.00 (S1), 110.35 (S2), 110.00 (S3)

Resistance: 111.60 (R1), 112.20 (R2), 112.90 (R3)


Support: 1.0570 (S1), 1.0530 (S2), 1.0500 (S3)

Resistance: 1.0600 (R1), 1.0640 (R2), 1.0700 (R3)

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