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THE EUR/USD. Good Nonfermi, but a weak ISM non-manufacturing index – the dollar again under pressure

RSS feed for Forex Review 01.11.2019 at 17:09

Daily analytical reviews of the Forex market

American Nonfarm not impressed with traders pair eur/usd: the pair continued to trade approximately at the same positions as before the release. Although overall data on the labour market was good, almost all the components came out in the "green zone". But dollar bulls again, no luck: over the past few months one of the components of Nonformal out of the General rut and negates the overall positive effect. For example, with a significant increase in employment increases the unemployment rate. Or Vice versa: on the background of reducing unemployment significantly slows the growth in payrolls. Today's Nonfarm has also been mixed. In this case, summed up the inflationary component of the salary.

Although other parameters of the American labor market is really pleased: unemployment is minimal and the expected increased 3.6% (the rate still remains at record lows), and the number of increase in non-farm payrolls rose to 128 thousand. The experts expect to see this indicator is much lower at around 85 thousand. In the manufacturing sector of the economy, analysts expect the reduction to 50 thousand (due to the mass strikes in the factories of General Motors), but in the end, the indicator fell by 36 thousand.

However, a good result Nonformal remained in the shadow of another indicator – Average Hourly Earnings. Month-on-month salaries grew by only 0.2%, in annual terms – up to 3.0%. Rather weak growth in the level of average hourly wages again disappoint dollar bulls, especially in light of recent inflation releases.

in addition, at the last meeting of the fed Jerome Powell clearly hinted that further steps by the American regulator will largely depend on the dynamics of inflation growth. A strong US labor market has traditionally provided support for the dollar, but inflation has for many years been the weak link of the American economy. Uncertain wage growth has long been a "headache" members of the fed, especially against the background of a strengthening labor market. Even Janet Yellen as head of the fed said that wage stagnation with steady growth in employment is a worrying sign, which could adversely affect inflation dynamics. Today's release once again reminded traders that this question is still on the agenda.

this is why the market has ignored a very good Nonfarm. Prospects for inflation now more concerned about dollar bulls. Here it is worth Recalling that this week in the US was published, and other inflationary indicators: firstly, it is the main index of personal consumption expenditures, and second – level spending. These figures reflect not only the costs of the Americans, but also to determine the trend in retail sales, but also indirectly influence the dynamics of inflationary trends. In addition, the dynamics of the PCE Price Index closely watched by fed members that use this indicator as an early indicator of inflationary changes. In other words, data releases complement the overall picture, which is especially important in light of recent events.

thus, the index of personal consumption expenditures came out worse than expected – on a monthly basis, it decreased to zero level, continuing the negative trend. In annual terms, the indicator also decreased (1.7%), although in this case the decline was expected. The level of spending showed weak growth (0.2 percent), although the consensus forecast was talking about increasing to 0.3%. Overall, these data conform and are consistent with the uncertain growth of the consumer price index, which was published earlier.

the Immediate reason for the current weakening of the dollar (and the eur/usd's rise) became critical in the field of industrial production of the United States. We are talking about the production index ISM. In October at least it recovered to the level of 48.3 points after a decline to 47,8 (this is the weakest growth rate over the last 10 years). Price component index also shows a negative trend, while remaining under the key 50-mark (namely mark of 45.5).

Thus, good data on the labour market (excluding salaries) have not helped the dollar to regain its position, while the weak ISM manufacturing index allowed the bulls eur/usd high today (1,1172). The more that European currency can now "afford" a correction due to yesterday's release of data on inflation in the Eurozone. The consumer price index was at the level of forecasts (0.7 percent), but core inflation unexpectedly turned out better than expected at 1.1% (down 1.0 percent). And while we are talking about minimal gains, the fact still supported the European currency.

From a technical point of view, the situation has not changed: the bulls eur/usd still needs to overcome the level of 1.1220 (the upper line of the Bollinger Bands on the daily chart) to confirm the priority of the Northern movement. In this case, buyers can expect larger growth rates up to the level 1,1300, which corresponds to the lower boundary of the cloud Kumo and the upper line of the Bollinger Bands on the weekly chart already.The material has been provided by InstaForex company -