Should you buy or sell the US dollar after private employment misses expectations in August?

This week is full of US economic data relevant to market participants. In particular, traders, investors, and the Fed will scrutinize the labor market data.

Yesterday, the JOLTS report hinted that the job growth slowed notably. This was confirmed earlier today by the weak private employment data.

The US economy added 177k new private jobs in August, mainly in the leisure and hospitality sectors. Job growth slowed notably, falling behind expectations of 194k for the month.

It is the second time this week that data points to the same outcome – a softening labor market. As such, traders raised their bets that the Fed will end the tightening cycle sooner rather than later. Also, the chances of Friday’s NFP report missing expectations have increased drastically.

EUR/USD bullish technical picture points to 1.10 and above

It is no wonder that the US dollar weakened on the data. In fact, the dollar’s bearish trend started yesterday when the EUR/USD exchange rate moved from below 1.08 to 1.0850 on the soft JOLTS report.

Interestingly, by bouncing from the 1.08 area, the EUR/USD pair completed a falling wedge pattern. This is a pattern often retraced completely, so one should not be surprised to see the exchange rate moving into the 1.12 area sooner rather than later.

Moreover, the consolidation overnight looks like a bullish flag pattern that further supports the bullish argument.

All in all, it seems to be just a matter of time until the EUR/USD moves back above 1.10. Depending on the NFP report on Friday, we might even see a new high for the year.