EUR/USD rises as weak US nonfarm payrolls suggest worst could be over

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on May 8, 2020
  • The EUR/USD pair rose slightly after the Bureau of Labour Statistics released the April nonfarm data.
  • The US economy lost more than 20 million jobs in April as the unemployment rate soared to 14.8%
  • The numbers show that the worst could be over for the US labour market

The EUR/USD pair rose slightly today after the Bureau of Labour Statistics (BLS) released disappointing April nonfarm payroll numbers.

Nonfarm payrolls
EUR/USD rises slightly after weak nonfarm payrolls data

US nonfarm payrolls numbers

According to the Labour department, more than 20.5 million Americans lost their jobs in April as most states asked their residents to remain at home. Analysts polled by Bloomberg were expecting the NFP to decline by 21 million while those polled by Reuters were looking at 22 million.

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Most of these numbers – about 18.1 million – were in temporary unemployment.

The U3 unemployment rate rose from a 50-year low of 3.5% to 22%. This number measures the people of working age who are not in employment. The rate rose evenly across all segments, with whites rising to 14.2 and 16.2% for blacks.

The closely-watched U6 unemployment rate surged to 20% from the previous 8.7%. This rate includes those people who are working part-time and those who are marginally attached to the labour force.

The private payrolls lost more than 19.5 million people, which was slightly lower than the estimate provided by ADP on Wednesday.

Meanwhile, average weekly hours rose from the previous 34.1 to 33.2. At the same time, the average hourly jumped from the previous 3.3% to 7.9%. On a month over month basis, the wages rose from the previous 0.5% to 4.7%.

According to the bureau, the leisure and hospitality sector was the most affected. The sector lost more than 7.7 million jobs followed by education and health services. The manufacturing sector lost more than 1.3 million while the retail sector lost more than 2.1 million jobs. The bureau said:

“The changes in these measures reflect the effects of the coronavirus (COVID-19) pandemic and efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality.”

These numbers show how the current coronavirus pandemic has hit the American economy. According to the Labour department, more than 33 million people have filed claims for jobless claims in the past seven weeks. This is partly because the CARES Act expanded the eligibility of these claims.

A stream of weak economic data

The EUR/USD pair has reacted to a stream of negative data from the United States. The number of confirmed coronavirus infections has surged to more than 1.2 million people while deaths have risen to more than 76,000. These deaths are about 30% of the total worldwide deaths, which is sad because the US accounts for about 4% of the global population.

Other economic data from the US has been weak. This week, data from ISM showed that non-manufacturing PMI dropped to a record low of 41.8 in April. Further, the country’s exports declined by 9.7% in the month leading to a 11.6 per cent increase of the trade deficit.

Recent numbers also showed that the economy contracted by 4.8% in the first quarter. Other numbers like manufacturing PMI, retail sales, housing starts, and industrial production have nosedived too.

Still, analysts believe that the worst could be over. Indeed, while the jobless claims data was weak, it was lower than the peak of 6.8 million in March. They predict that the situation will improve when more states open and when more tests are done.

EUR/USD technical outlook

EUR/USD
EUR/USD technical outlook

On the four-hour chart, the EUR/USD pair rose to a high of 1.0852 from the intraday low of 1.0767. The price is along the 23.6% retracement level and is a few pips above the 100-day and 50-day EMA. I expect the pair to move lower and possibly retest the day’s low of 1.0767 since bears seem to be in control. On the flip side, a move above the 100-day and 50-day EMA will see it attempt to retest the 38.2% retracement level of 1.0960.

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