NFP, Non-farm Payrolls, USD Talking Points:
- This morning brings the release of Non-farm Payrolls data for the month of January.
- The US Dollar jumped to a fresh yearly high ahead of the release after a destructive evening in Europe, with the continent’s largest nuclear plant undergoing attack.
- This was a strong report, with headline number of +678k v/s the expected +438k. The unemployment rate came in at 3.8% v/s the 3.9% expected. And Average Hourly Earnings, a sign of wage inflation, cooled to 5.1% v/s the expected 5.8%. That last data point could be especially helpful to the FOMC ahead of their rate decision in two weeks.
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Non-farm Payrolls was released this morning to the tune of +678k . This is the final NFP release ahead of the March FOMC rate decision where the bank is expected to hike rates for the first time since 2018. But, perhaps more importantly, this would be the first step towards paring back some of the outsized accommodation that had been set since the onset of Covid.
Jobs data has remained in focus as this has been the Fed’s pressure point for liftoff. Inflation raged throughout last year but the bank continually avoided any element of tightening for fear of choking off the labor market recovery.
This morning’s report has been released and both the headline number and unemployment rate bested expectations while Average Hourly Earnings cooled. The headline number printed at a strong +678k versus the expected +438k, and the unemployment rate dipped down to 3.8% when the market was looking for a 3.9% print. But, perhaps most importantly, inflation showed signs of cooling via Average Hourly Earnings, coming in at 5.1% versus the expected 5.8%.
That last part is especially important as FOMC rate policy has been in focus of late. The Fed is widely expected to begin lift-off at their rate decision in two weeks, and given the recent tumult in geopolitics, the expectation has started to build in for a standard 25 basis point hike versus the 50 basis point hike. But, with inflation cooling in this report, there is perhaps evidence of some of the ‘transitory’ component of inflation beginning to price-out; but this is just one data point so we’re going to want to be careful there.
The US Dollar
The US Dollar had already broken out to fresh yearly highs ahead of this morning’s data, but this NFP report is only pushing the bid higher.
I had looked at this setup yesterday, sharing a short-term ascending triangle formation that had brewed after a couple of different tests of a key zone of resistance. That breakout has now taken-hold and prices in DXY are now approaching the 99 level on the chart.
US Dollar Hourly Price Chart
Stocks Are Handling the Print Well So Far
At this point U.S. stocks are holding around support even with this very strong print. The Average Hourly Earnings component could be an explanation as to why, as the lower wage inflation may have removed some pressure from the Fed and, perhaps is a sign that a transitory component of inflation is beginning to roll off of the data.
That being said, equities do remain in precarious spot longer-term, especially given the fact that last night’s bearish driver was an attack on Europe’s largest nuclear plant. While the Fed can fight many risks with their liquidity programs I’m not sure if nuclear contamination is one of them.
This can make for a troubling weekend to be holding risk as Russia has shown a tendency to amp up aggression when markets are closed and the West is even more vulnerable.
In the Nasdaq 100, the support levels that I’ve been following this week have seen a number of inflections already. Price is currently sitting on the same 13.9k level that was in-play earlier this week. This has bearish potential, focusing on the next spot of support around 13,760, after which 13,613 comes into the picture.
Nasdaq 100 Hourly Price Chart
EUR/USD Fresh 20-Month-Lows
This is something that happened overnight and, at this point, bears are holding the move well through the NFP release. But EUR/USD is trading at fresh 20-month-lows after crossing a massive spot of confluent support.
I had looked at a short-term descending triangle formation in EUR/USD in yesterday’s US Dollar Price Action Setups, and that formation has now filled in. From longer-term charts, there’s little long-term support nearby at this point.
EUR/USD Monthly Price Chart
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX