NFP, Non-Farm Payrolls, USD Talking Points.

  • The January non-farm payrolls data was released this morning.
  • Expectations were very low after the previous week’s ADP report showed a contraction of 307,000 versus expectations of a 201k increase.
  • The analysis contained in the article relies on price behavior and K-chart formation. To learn more about price behavior or K-line chart patterns, please see our DailyFX Education section.

This morning, the U.S. released its non-farm payrolls data, and the threshold is incredibly low. This is a live article, which means it will be updated before and after the event, with each update indicated by the time it was added before the particular entry.

8:55

As the excitement begins to settle down for now, it's time to look more deeply into the numbers. Unemployment is even at 4 percent, compared to 3.9 percent expected. Average hourly earnings are as high as 5.7 percent, compared to the forecast of 5.2 percent.

This has been a very key focus for the Fed. As they have ignored inflationary pressures throughout the last year, calling them "temporary", the concern is that inflation has not yet been reflected in wages. This morning addressed this point and highlighted the fact that inflation is hitting workers' wages, which of course will affect businesses that now have higher personnel costs.

All other factors held constant, this could be good for bond yields and bad for stocks.

Sure enough, the 10-year Treasury yield is at its highest level in more than two years.

10-Year Treasury Yield

A K-line chart prepared by James Stanley. TNX on transaction view

8:50

EUR/USD is pulling back from resistance set at the monthly highs. This is the same rise as a few weeks ago at 1.1483. If this move holds, it could set up a very attractive double top formation.

EUR/USD four-hour price K-line chart

NFP: Non-Farm Payrolls at 467K, Dollar in Focus After Overselling

A K-line chart prepared by James Stanley. EURUSD on Tradingview

8:40

The NFP just released with a headline number of 467k, proving once again that ADP employment numbers are a poor predictor of non-farm payrolls.

The dollar immediately moved higher as the currency was quite oversold ahead of the release. This is closely related to the pullback in EUR/USD, which is in its most overbought state since December 2020.

USD 15-minute price chart

NFP: Non-Farm Payrolls at 467K, Dollar in Focus After Overselling

A K-line chart prepared by James Stanley. USD on Tradingview, DXY

The stock market doesn't seem to like this data as expectations of a slowdown in the week's NFP and job growth, or even a contraction in that data point could support a slower Fed rally. But apparently that's not the news we posted this morning, and buying is leaving stocks, especially the rate-sensitive Nasdaq 100, which is tilting toward a key support level near 14,375 on the K chart.

Nasdaq 100 four-hour price chart

NFP: Non-Farm Payrolls at 467K, Dollar in Focus After Overselling

A K-line chart prepared by James Stanley. Tradingview on the Nasdaq 100

8:20

Prior to the event, the dollar was extremely weak and the currency moved into oversold territory on the four-hour chart. This has become a recent occurrence for the dollar as it was oversold a few weeks ago after the CPI rose 7%, but only entered overbought territory a few weeks after the FOMC interest rate decision.

Things have changed a lot in the week since that Fed meeting. Expectations for U.S. economic data have deteriorated, and after yesterday's ECB rate decision, hopes are starting to build for an eventual change in policy from the ECB, with some research firms even calling for a rise later in the year. The dollar formed an evening star pattern on Monday, followed by the usual targeting of a bearish reversal – a pattern that has continued to fill in since then, with the RSI now falling into oversold territory.

USD four-hour price chart

NFP: Non-Farm Payrolls at 467K, Dollar in Focus After Overselling

A K-line chart prepared by James Stanley. USD on Tradingview, DXY

This corresponds to a strong shift in the EUR/USD pair, which accounts for more than 57% of the DXY composition; thus, in line with the oversold reading of the USD is the overbought reading of EUR/USD.

EUR/USD levels remain a concern as prices are now pushing higher towards monthly highs and remain unchanged ahead of the NFP release. The level is at 1.1484, slightly above 1.1500 which is a major psychological level and marks the top of a long-term resistance zone.

Reflecting the other side of the dollar once again, EURUSD had set up for this uptrend earlier in the week, forming a morning star pattern that typically then targets a bullish reversal. These levels have come into play ahead of this morning's non-farm payrolls report, and the prospect of a reversal in the dollar and EUR/USD is likely to be the subject of attention at this morning's event.

EUR/USD four-hour price K-line chart

NFP: Non-Farm Payrolls at 467K, Dollar in Focus After Overselling

A K-line chart prepared by James Stanley. EURUSD on Tradingview

– By James Stanley, Senior Strategist at DailyFX.com

Connect and follow James on Twitter at @JStanleyFX

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