NFP Ahead: Should We Get Ready for Another Surprise?

EUR/USD Rebounds. Will Powell’s Testimony Reveal New Rate Clues?

It’s Non-Farm Payrolls week and usually, this means that we should prepare for some interesting swings and potential surprises. The last NFP release came with a huge surprise as the actual number was more than double the forecast (517K vs. 193K). The release sparked speculation about the FOMC’s next move and whether the rate will be increased by 50 bps instead of the consensus of 25 bps.

As the inflation threat doesn’t seem to go away, investors have come to terms with the fact that the Fed will keep rates higher for longer. Chair Powell stated that the Fed’s actions will be data-dependent, which makes this week’s NFP release more important. The Chairman will testify twice this week, before the jobs data release and it will be interesting to see if he makes any remarks related to the labor market.

Key Data for the Week Ahead

The first part of Powell’s testimony takes place Tuesday at 3:00 pm GMT before the Senate Banking Committee, on the topic of the Semi-Annual Monetary Policy Report. Wednesday at 3:00 pm GMT he will testify on the same topic before the House Financial Services Committee.

Before Powell’s second testimony, ADP, Inc. will release its version of the Non-Farm Employment Change report, which shows the estimated change in the number of employed people, excluding the government and the farming sector. The release is scheduled for Wednesday at 1:15 pm GMT.

The main event of the week is set for Friday at 1:30 pm GMT: the Non-Farm Payrolls. Alongside we have the Average Earnings and the Unemployment Rate, both coming out at the same time as the NFP. These three reports paint a detailed picture of the labor market in the U.S. and usually determine the next important moves for the US Dollar. The NFP is expected to drop from 517K to 206K but as we’ve seen last time, surprises can happen.

Technical Outlook – EUR/USD

EUR/USD has been moving down since early February, mostly due to US Dollar strength. But the Dollar has been weakening lately and it looks like the retracement might be over. The price came very close to the support at 1.0500 and bounced higher in an attempt to move above 1.0635.

If the bulls manage to take the pair above the 50-day Moving Average, this will mark the end of the pullback and a possible uptrend resumption. But just as the rate plans are ‘data dependent’, the Dollar’s movement is also data dependent. If Chair Powell will give us any clues about the rate during his testimonies, the Dollar will react and the pair’s path will change accordingly.

As long as the price remains below the 50-day MA, the outlook is bearish, with the possibility of sideways, choppy movement until Powell’s testimony and the release of the jobs data later in the week.