FOREX Fundamental Analysis for EUR/USD on July 10, 2023
The US labor market report, published on Friday, turned out to be worse than forecasts. Only 209 thousand jobs were created during the month, which was the worst dynamics since November 2009. However, are things really that bad with the US economy? The weakening of the dollar, in my opinion, looks illogical.
The figure of 209 thousand is quite strong and confirms the thesis that the labor market in the US is not going to slow down, especially since the unemployment rate fell from 3.7% to 3.6%, even further away from the June forecast of 4.1% by the end of this year. Nor does a 4.4% rise in average wages support a weaker greenback. Naturally, no economy can consistently add 500,000 jobs per month. But Jerome Powell warned about this, calling the figure of 200 thousand a very good indicator.
Nevertheless, the Fed is not going to salute victories, as the monetary authorities realize that reducing inflation from 9% to 4.5% is easier than sending it to the 2% target. June Non-farm Payrolls are unlikely to affect the regulator's plans for further rate hikes. At any rate, it did not drop the yields of treasuries, which again does not correspond to the EUR/USD surge in forex trading on the news.
Perhaps investors have rushed in and will soon reassess the report data. Or maybe they are waiting for the inflation report to show a significant drop in the consumer price level. Anyway, but this week hedge funds began to actively get rid of the dollar.
Bannockburn Global Forex believes that the release of the U.S. inflation report will signal the return of EUR/USD to the uptrend, as, according to analysts, the pair's decline was a correction of growth.
I believe that as long as the Fed supports the rate hike, the dollar will not weaken, so the EUR/USD growth looks premature. Even if the pair will continue to strengthen on expectations of the inflation report, it should be sold on the facts. "Bulls" failed to consolidate above 1.0965, so we will open short positions on any increase in the quote.