Strong job growth gives a Dollar chance for an uptrend

Strong US job market data sharply increases the chances of an imminent reversal of the Fed’s monetary policy, contributing to strengthening the Dollar, which could start a prolonged upward trend over the coming weeks and even months.

943K jobs were created in July after 938K (revised up from 850K) a month earlier. This is an apparent acceleration in the normalisation of the labour market after very sluggish growth in previous months. A total of 146.8M jobs in the economy compared to a peak of 152.5M in February 2020, which means there are still around 5.7M to full recovery.

Average hourly earnings rose 0.4% to the previous month and 4% to July last year. The rebound reflects increased competition between employers for staff, threatening to become a self-sustaining inflationary spiral.

Traders should pay attention to the support area near 1.1700 in the EURUSD. A sustained break below these levels would signal the start of an extensive recovery for the Dollar. But the same news is not so straightforward for the stock market.

The S&P500 futures have rewritten record levels and are hovering around those levels. Still, a persistent strengthening of the Dollar will almost certainly reverse the short-term bullish sentiment, giving way to a corrective pullback.

The FxPro Analyst Team