The first Friday of the month can only mean one thing – US NFP data. While bank economists left their estimates largely unchanged after Wednesday’s strong ADP payroll number, I think it’s fair to say most traders were looking for a stronger number.

And let us not forget that Canada also had employment data to release. This brief shift to a macroeconomic focus is still very much against a background of the uncertainty of the coronavirus.

While FX was mostly content to await the data, equity markets in Asia and Europe were slowly giving back some of Thursday’s gains. The rollercoaster continues and shows little sign of abating any time soon.

OK enough waffle, what were the numbers? For the US Non-Farm Payrolls for January were +225k v +160k expected although this was tempered by an increase in the unemployment rate from 3.5% to 3.6%.

For Canada, there was a gain of 35k jobs v 15k expected and the unemployment rate dropped from 5.6% to 5.5%. Now keep in mind the USD had been making some decent gains over the prior 48 hours and as mentioned traders were probably skewed a little towards a stronger number. So the ensuing price action might have been a little more muted than one might have expected after such impressive job gains.

Yes, we got the usual 20-point chop around after the number. USDJPY didn’t like life above 110.00 and dropped as low as 109.53 before recovering to 109.80 by the end of the day. EURUSD tried a squeeze higher but the support turned resistance at 1.0980-85 proved tough to break and ended closing at session lows around 1.0943.

GBPUSD followed a similar path also closing at session lows at 1.2882. USDCAD tugged both ways by the data. Initial price action saw a drop from 1.3310 to 1.3278 but by the close, we were back to 1.3308. XAU rallied to a high of 1,574 before closing at 1,570.

Meanwhile, equities seemed to be reacting more to coronavirus uncertainty than the implications of the data. The DJ would close lower by almost 1% while the S&P and Nasdaq end down just over 0.5%. What conclusion can we draw from this? Well, unseasonably warm weather probably gave the jobs number a boost. But, its events in China that traders will focus on in the week ahead and for now, the USD is the safe haven of choice.

As the USD is currently asserting its strength across the majority of major currency pairs, I thought I’d take a quick look at a daily EURUSD chart. We know resistance sits close by at 1.0980-85 and as you can see support now sits at the October 2019 low of 1.0880. I’m sure many of us thought it would continue south from that point but it wasn’t to be. So this now represents major support.

To see where we last traded below that level, you would have to go back to May of 2017. It’s a big level! Keep it on your radar.

David Hannigan

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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