A1 Trading Company

August 6, 2021

What's Next For The USD After Friday's NFP Report?

Bart Kurek

On Friday the 6th of August, the US printed their monthly Non-Farm Payroll numbers, and this was a huge one!

The US Bureau of Labor Statistics reported today that the total non-farm payroll employment rose by 943,000 in July, and the unemployment rate declined by 0.5% to 5.4%. Notable job gains occurred in local government education, leisure and hospitality, and professional and business services.

Employment Change

Unemployment Rate

Average Hourly Earnings

The USD found fresh bidding interest in the wake of a strong US employment report for July. Non-farm payroll came in at 943K for July, which is better than the 870K the market was expecting and an improvement on the previous month's 938K. The US unemployment rate fell to 5.4% in July, beating analyst expectations for a decline to 5.7% from June's 5.9%.

The US average hourly earnings for all employees on private nonfarm payrolls increased by 11 cents to $30.54, following increases in the prior 3 months. Average hourly earnings for private-sector production and nonsupervisory employees also rose by 11 cents in July to $25.83. The data for recent months suggest that the rising demand for the labour associated with the recovery from the pandemic may have put upward pressure on wages.

The Fed should feel pleased with the pace of the recovery in the labour market. Wages are rising and house prices are booming, so it will become increasingly difficult to justify the very loose stance of monetary policy. Financial markets should be prepared for more communication in a gradual tapering in bond purchases in the fourth quarter.

Will Jobs Gains Prompt the Fed to Ease Stimulus?

The stronger rise in non-farm payrolls and the upwards revision to previous months' gains indicates that employment growth has shifted into a higher gear and that the drag on hiring from labour shortage is easing. This suggests that economic growth may be holding up better than we had feared and leaves open the possibility of Fed Chair Powell dropping a stronger hint that tapering is on the way.

However, some argue that still with 5.7 million fewer Americans employed than before the pandemic, it's too early to contemplate tightening policy or to pull back on the reins of fiscal policy. Instead, policymakers should fix their gaze on a full recovery and on raising US economic productivity for years to come through significant infrastructure investments.

We know the Fed is now using employment as their primary mandate for policymaking. Stay tuned into the upcoming FOMC events where we will see whether they will hint tapering soon.

Impact on XAU/USD:

Gold prices did not stand a chance following this very strong non-farm payroll report, falling 2.2% today. This employment report was terrible for gold as it did not support needs for safe havens and given a good chunk of the wage gains is from low-paying jobs, it did not do much for driving inflation hedges.

It's likely we could see further downwards pressure as Fed tapering bets grow following this strong NFP report. Price has once again gone underneath the long-term channel's top and is actually hovering around a key horizontal level at 1765.

If price will use this level as support, we could see price reach lows at the bullish order block at around 1740, however, if price breaks this zone we could see it tumble towards the psychological 1700 level.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

My Crazy Trade On Gold: Up $8000

Hey Traders! This week has been wild for Gold! Thanks to insights from the EdgeFinder, I've been in a trade on XAUUSD since May 3rd. Initially, I jumped in due to weak jobs and PMI data, sticky inflation, and solid support/market structure. Here’s a quick look at my gold trade: Entry Recap: On May 13th, […]

Read More
Is Gold the Buy of 2024?

Rates move lower after the BoE announced their latest monetary policy report to keep rates unchanged at 5.25%. Unemployment came in higher this morning with the 30-year bond auction coming up Thursday afternoon. In the midst of a slow news week in the US, gold is sitting at a very favorable position according to the […]

Read More
Yields Fall Ahead of Earnings

More earnings reports come out this week is causing an inflow of buyers in the equities market while yields begin the week on a decline. Last week's Fed meeting showed up as "less hawkish" than investors expected causing risk appetite to increase at the start of the summer months. EdgeFinder Analysis As we come off […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenucross-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram