The Dollar Was Supported By November Reports On The U.S. Labor Market

Includes: UDN, USDU, UUP
by: Dmitriy Gurkovskiy

Last Friday, the EUR/USD pair reached the lowest level in more than three weeks.

The November statistics on the US labor market were positive and supported the USD.

This week will be as busy for the main currency pair as the previous one.

The EUR/USD pair was so impressed by last Friday’s statistics on the US labor market that it managed to climb from the low it had reached on November 20th. The reports were positive indeed. Of course, there were some nuances, but in general, the statistics were very good.

So, the unemployment rate in the US in November remained unchanged as expected, at 4.1%, the same as the October reading. It’s a very good result, given that a lot of investors had doubts about stability of the indicator. However, after falling in October, the indicator didn’t raise in November, and investors liked this fact. The non-farm employment change was 228K in November, although it was expected to be 198K. The number is a bit weaker than the October one, but it was expected and, therefore, didn’t disappoint anybody.

However, the indicator that describes salary growth rate made investors doubt a bit. The average hourly earnings increased by 0.2% m/m in November, which is better than the month before when it lost 0.1% m/m. Still, the problem is that the indicator was expected to add 0.3% m/m. There hasn’t been stable dynamics in salary growth for a long time: employers are revising salaries rather slowly, because they have to consider domestic demand and global economic outlook. And the market conditions aren’t always suitable for raising salaries.

As a result, November reports on the US labor market are looking quite positive. The US Dollar strengthened, but it will face several other events this week. On December 12th and 13th, the US Federal Reserve is scheduled to have another meeting, where it is expected to raise the key rate for the third time this year. Market expectations predict the increase of 25 basis points and investors are pretty fine with that.

In addition to that, the US will publish reports on retail sales andindustrial production. The European Central Bank also will have a meeting and the Eurozone is planning to report on several macroeconomic indicators as well. So, this week is anticipated to be very busy and intensive for the EUR/USD pair.

From a technical point of view, the H4 chart shows that the EUR/USD pair has tested the support level, rebounded from it, and right now may be forming a new rising impulse. In the mid term, the price may continue falling toward the support level of the projected descending channel at 1.1605.

The short-term scenario for the EUR/USD pair is presented by the H1 chart. Apart from rebounding from the support level of the mid-term descending channel, the pair also has broken the resistance level of the short-term downtrend channel. If the uptrend continues, its targets may be the projected resistance levels at 1.1822 and 1.1863.

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.