The highlight of the trading week, US nonfarm payrolls, benefitted the US dollar. The upbeat official employment data proves a robust recovery of the US labor market and the whole US economy. Nevertheless, there is something to spoil the overall rosy picture. I mean average hourly earnings. However, this did not help buyers of EUR/USD. An upward correction was over on early Friday. Later in the trading day, the nonfarm payrolls again pushed the pair downwards.
Interestingly, every month nonfarm payrolls spring a surprise. As a rule, one of its components does not come in line with expectations, thus arousing some mixed feelings. At first glance, the figures were extremely positive. Almost all metrics, except wage growth, turned out to surpass expectations. However, today financial markets in many countries are closed for Good Friday. Unless this day-off, dollar bulls would have taken full advantage of the situation and insisted on their leadership in all pairs with majors currencies. Today, all trading floors in Canada, the UK, Australia, New Zealand, and Europe are closed for Good Friday ahead of Easter. So, the greenback has revealed its dominance only against the euro, though EUR/USD fluctuation measures just 40 pips. In other currency pairs, USD was drifting almost flat.
Nevertheless, this does not downplay the report released today. The market will respond to such upbeat data next week. The nonfarm payrolls for March dispelled Jerome Powell's fears about a patchy recovery of the labor market. Almost all metrics were beyond expectations and only wage growth undershot the forecast. Anyway, traders took little notice of average hourly earnings (-0.1% m/m and 4.2% y/y), shifting focus towards an impressive increase in employment in the US public and private sectors.
The US economy created 916,000 jobs in March, much stronger than the expected 650,000 new jobs. This is the strongest score for the recent 7 months. In the private sector alone, the indicator logged growth of 780,000 jobs whereas analysts had projected 575,000 new jobs. The manufacturing sector added 53,000 jobs, the best score since September last year. The unemployment rate declined to 6.0% in March from 6.2% in the previous month. Importantly, this is a lagging economic indicator. In other words, the figures released today refer to the situation in February. The curve of the unemployment rate showcases a robust economic recovery. The jobless rate has been going down for 11 months in a row. In April 2020, this indicator surged to 14.7%.
All in all, today the US dollar found solid support for its further rally. Dollar bulls will be able assert strength on Monday when US markets will reopen or on Tuesday when European markets will set in motion after the holiday. We should not be confused by the current subdued response from traders. The nonfarm payrolls for March will resurface at the Fed's policy meeting in April. Jerome Powell could express more hawkish rhetoric. The US labor market is not the only factor to set the stage for the greenback's advance. The $1.9 trillion recovery plan is being implemented in the US. The White House is going to lobby a new rescue package worth $2.6 trillion. Another weighty argument is progress in the mass vaccination. Besides, Americans have amassed billions of dollars that could be spent in the second half of the year.
In turn, the single European currency has been weighed down by a variety of factors such as tightening restrictions on the key EU economies, a slow pace of the mass vaccination, and a slowdown in the EU countries. The core CPI stood at 0.9% in March with a downward dynamic for the second month on a row.
Technically, short positions on EUR/USD are preferable despite a two-day correctional climb. The buyers still do not have weighty arguments for reversing the downtrend. The odds are that the downtrend will resume next week.
In the daily chart, EUR/USD is now between the middle and the lower lines of Bollinger Bands, above all lines of the Ishimoku indicator, and below the Kumo cloud. Ishimoku is sending a bearish signal, warning of a further decline of quotes. The key support which also serves as a downward target is at 1.1700 which is the lower border of Bollinger Bands on the same timeframe. It would be a good idea to sell EUR/USD either from the current level or on correctional rallies.
