US Government Shutdown Keeps Traders on Edge, NFP Delayed
EUR/USD Moves Sideways. U.S. Data Eyed for Next Move
To the disappointment of many, the release of the Non-Farm Payrolls (NFP) report was delayed last week due to the U.S. government’s partial shutdown. The release is crucial for gauging the situation of the labor market in the U.S. and plays a key role in the interest rate path.
However, we did get a glimpse into the jobs market with the release of the ADP Non-Farm Employment Change, which went through as planned last week. The ADP report is also known as private sector employment and shows the change in the number of employed people during the previous month, excluding the farming industry and government sector. The numbers were far below the estimated 52K, at -32K, showing that the private sector shed jobs instead of adding any.
The ISM Services PMI (released Friday) also disappointed, coming in at 50.0, while the estimate was 51.8. Although the NFP was not released, the data that made it through the government shutdown showed that the U.S. economy is slowing down, especially in the key sectors. This increases the possibility of back-to-back rate cuts until the end of the year. At the time of writing, there is a 96.2% possibility of a 25-bps rate cut in October and an 86.3% probability of another quarter-point cut in December, according to the CME FedWatch tool.
Economic Calendar Highlights
On Monday, at 5:00 am GMT, European Central Bank (ECB) President Christine Lagarde will testify before the Committee on Economic and Monetary Affairs of the European Parliament. The testimony may generate volatility on EUR pairs, but given the early hour, the impact may be muted.
The FOMC Meeting Minutes will be released on Wednesday at 6:00 pm GMT, showing the details of the latest FOMC meeting, and possibly offering clues about the rate path going forward.
On Friday at 12:30 pm GMT, there will be another tentative to release the U.S. jobs data, namely the NFP, the Average Hourly Earnings, and the Unemployment rate. At the time of writing, the U.S. government is still in shutdown mode, but things could change by Friday. At this time, it is unclear whether the data will be released or not.
Technical Outlook – EUR/USD
The previous week was very uneventful, mostly due to the government shutdown and the lack of data. However, the pair is still trading above the support at 1.1700 and close to the 4-year high above 1.1900. As long as the price action remains trapped inside the 1.1600 – 1.1900 range, we can expect to see back-and-forth moves without clear direction.
The US Dollar bulls broke the long-term bullish trend line, which is an important victory, but if U.S. data keeps disappointing, the Euro bulls could bring the pair back above the trend line. Given last week’s choppy price action, traders should wait for a clear break of a S/R level or the potential release of the NFP, which would offer more clarity.
