At the start of the US session on Friday, the dollar significantly weakened its position, reacting to the controversial Nonfarm payroll report. After some hesitation, traders interpreted the published figures against the greenback, after which the dollar index again headed towards the 89th figure. Buyers of EUR/USD, in turn, were able to win back some of the lost positions, returning the pair to the area of the price range of 1.2150-1.2270. Plus, the trading principle "buy the rumor, sell the fact" worked: throughout Thursday and the first half of Friday, the dollar was in demand, but as soon as the long-awaited figures were published, the dollar fell under a wave of sales. In other words, key data on the growth of the US labor market failed to strengthen the dollar rally, despite the "green color" of some components of the release. And as soon as the market froze in doubt, sellers of EUR/USD began to actively take profits, thereby extinguishing the downward momentum.
Of course, it is still too early to make conclusions about the Nonfarm. In two weeks, June 16, everything will be settled on the next meeting of the Fed. Today's release can be used by both "hawks" and "doves" of the Federal Reserve.
For example, representatives of the "hawkish" wing of the Fed have a fairly powerful argument: the unemployment rate in the United States fell below the 6% mark for the first time since March last year. Today, the indicator was released in the "green zone", reaching the target of 5.8%. That is, in fact, unemployment is approaching pre-crisis values in the wake of mass vaccination and the recovery of the American economy. Data on salaries are also on the side of the "hawks". The average hourly wage in May jumped to 2% (in annual terms).
However, traders reacted coolly to this component of the release. Here we can talk about a kind of "crisis of the genre": inflation indicators affect the dynamics of dollar pairs only through the prism of "hawkish" comments of the Fed representatives. If the members of the US regulator ignore the inflation release (as, for example, happened with the PCE index, which updated multi-month highs), the dollar similarly ignores the published indicator. Therefore, the very fact that the wage growth indicator came out in the "green zone" does not mean anything. Most of the representatives of the Federal Reserve leveled the importance of inflation indicators: in their opinion, the increase in inflation is temporary, due to the low base of last year and shows a distorted picture, which is inherent in the periods of the "restart" of the economy.
Actually, for this reason, traders focused on the weaknesses of today's publication. For example, the number of people employed in the non-agricultural sector increased by 559,000, while, according to experts, last month almost 700,000 jobs were to be created in the US. In the private sector, the number of employed people increased by 490,000, while the forecast was at the level of 600,000. The "red zone" also includes the indicator of the growth of the number of people employed in the manufacturing sector of the economy. The share of the economically active population has also decreased.
All these factors put pressure on the US dollar, which weakened throughout the market, including in a pair with the euro.
By and large, the dollar bulls have driven themselves into a trap, escalating the situation around Friday's release. The greenback has once again become a victim of the inflated expectations of traders. Many previous releases have contributed to this. First, the ADP report, which was published the day before yesterday. So, according to the estimates of the specialists of this agency, 978,000 jobs were created in the US private sector in May. This result turned out to be much higher than the predicted level - analysts expected to see this figure at the 600,000 mark. This report was released in the "green zone", creating an imaginary confidence among many market participants that the official figures will be better than expected. The second factor supporting the greenback was the weekly growth rate of initial applications for unemployment benefits, which also came out in the green zone yesterday. The indicator has been consistently declining for the fifth consecutive week. If at the end of April this figure was at the level of 590,000, today it came out at around 385,000.
Considering such previous figures, the market began to win back strong Nonfarm in advance. To continue the dollar rally, a "reinforced concrete" argument of a fundamental nature was needed: all the components of today's release should have entered the "green zone", leaving no shadow of doubt that the American market is recovering by leaps and bounds. This did not happen: the discovered "flaws" of Nonfarm payrolls disappointed traders, after which the EUR/USD bears began to massively fix profits, extinguishing the downward trend. The buyers intercepted the initiative, returning the pair to the range of 1.2150-1.2270, where it traded for almost three weeks - from May 18.
All this suggests that the pair will continue to trade within the mentioned price range. It should be noted here that representatives of the Fed will not be able to comment on today's release - 10 days before the meeting, the members of the regulator observe the "silence mode". Therefore, in the near future, market participants will be left on their own. Neither buyers nor sellers of EUR/USD will decide on large-scale price movements on the eve of two significant events: the ECB meeting will take place on June 10, and the Federal Reserve meeting on June 15-16. Therefore, in the perspective of the next few days, when approaching the lower border of the above range (1.2150), one can consider longs, if the level of 1.2200 is exceeded, sales can be considered.
