EUR/USD – The Fed could not have hoped for a better week of US jobs data

• NFP 187,000 in August (169,000 expected, 157,000 previously)
• Average hourly earnings 0.2% (MoM), 4.3% (YoY) 
• EURUSD slips after making earlier gains

If you’re a Federal Reserve official, you’ll find it hard not to be very pleased with the way this week’s gone from a labor market data perspective.

The JOLTS release at the start of the week was extremely encouraging as it continued a clear trend that brought the number of vacancies back to levels not seen in two years and not far from the pre-pandemic norm. Even without today’s report, that will have come as a huge relief for the Fed.

When you consider today’s report on top of that, the week couldn’t have gone much better. The headline NFP may have been a little stronger than expected but it’s still below 200,000 and the beat was more than offset by last month’s revision.

Then there’s average hourly earnings which fell back to 0.2%, a level far more consistent with the Fed’s goal if it can be repeated and again, below market expectations. The cherry on the cake is the participation beat and jump in unemployment, both of which point to more slack appearing in the labor market.

To be clear, the Fed won’t get carried away with today’s report. It’s just one that needs to be repeated on a number of occasions but there’s plenty of cause for optimism in there. If there was any doubt that the Fed will pause in September, today’s report surely puts an end to that debate.

USD rallies after initially falling

The initial move in the dollar made a lot of sense, it fell after the release as it was viewed as being beneficial for interest rates (less chance of a hike, earlier cut next year), but it didn’t take long to reverse course.

EURUSD Daily

Source – OANDA on Trading View

The catalyst for that is irrelevant but from a technical perspective, it doesn’t look great for the pair. Rather than looking to test this week’s highs, it’s slipping back toward the lows and near the 200/233-day simple moving average band. A move below last Friday’s lows could be viewed as a very bearish move, particularly in light of today’s report.

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