The US dollar retreated only modestly from its recent highs against various other major currencies despite February’s NFP released on 6 March coming in much lower than expected at negative 92,000. This article summarises the latest American job report and the revisions that came with it then looks briefly at the charts of EURUSD and GBPUSD.
March’s NFP came after an unexpectedly strong release in February but was significantly disappointing, missing the consensus by more than 150,000. December’s figure was also revised down into negative; between then and January, total employment was 70,000 lower than initially reported:
March’s data certainly seem to suggest that last month’s unexpectedly positive release is much more likely to have been an outlier than the beginning of a new trend of a relatively stronger American labour market. However, part of the reason for the latest results being so disappointing was the impact of medical strikes which might not continue for an extended period. Unemployment also rose unexpectedly back to 4.4%:
While still below November’s four-year high of 4.5%, unemployment certainly doesn’t seem to be on a downward trend or likely to start one imminently. This situation in itself might suggest that the Federal Reserve (the Fed) could cut rates faster this year, but the NFP like most other data is likely to play second fiddle to news of the conflict in the Gulf.
Oil’s enormous surge in recent days since the beginning of hostilities and effective shutdown of much of the Gulf’s capacity for exporting means that the threat of surging inflation around the world has risen hugely. Most major central banks including the Fed are likely to pause or delay previously expected plans to cut rates while some such as the European Central Bank (ECB) and Reserve Bank of Australia (RBA) are now expected to hike rates in 2026.
A clearly weaker job market in the USA compared with around this time last year is made more difficult by the likely rise in headline inflation over the next few months: the Fed might need to ‘walk the tightrope’ again between keeping rates low enough to avoid throttling the economy too much but not so low that control of inflation is lost. It’s unlikely to see a very large effect from the conflict on 11 March’s American inflation covering February, but in April and ahead the importance of inflation data for forex might be significantly higher.
Euro-dollar tests below $1.16
Euro-dollar reached intraday lows of more than three months in the first few days of March amid some flight to safety due to the conflict in the Gulf. Overall, the impact on inflation is likely to be higher in the eurozone than the USA given that the former is more dependent on imports of oil. However, sentiment on monetary policy has shifted strongly in recent days, with participants now expecting the ECB to hike twice this year compared to the previous consensus of no change.
The downtrend on lower timeframes gained pace from around 2 March as the Gulf conflict escalated with the price now testing $1.16. A clear break below the current area would suggest a retest sooner or later of November 2025’s lows below $1.15 in the area of the 23.6% weekly Fibonacci retracement. There’s no confirmed indication of saturation currently from the slow stochastic or Bollinger Bands although both are very close to signalling oversold; buying volume has remained relatively high in the last few days.
The obvious target for a relatively short-term bounce is the value area between the 100 and 200 SMAs around $1.17. Sustained gains to reach there seem quite unlikely in the near future given the momentum of losses recently and the overall situation but surprising results from upcoming US inflation or GDP or of course major updates on the course of the Gulf conflict could translate to the chart too.
Cable can’t break $1.335 yet
Despite overall strength for the US dollar in early March during the ongoing conflict in the Gulf, cable’s losses have been relatively limited compared to various other majors against the dollar. Participants slashed the likelihood of the Bank of England (BoE) cutting rates this month to only about 20% from around 80% in late February, but the Fed is still fairly likely to cut at least once by the end of the third quarter. British political instability has moved out of view for the time being.
6 March’s much weaker NFP gave cable a limited boost amid ongoing high volume, but the lack of clear upward momentum in recent days might suggest that more losses are possible in the next few days. Cable might arguably be a better candidate for selling than euro-dollar given that it’s a lot further above early November’s lows. However, behaviour during the next determined test of $1.335 is key and traders should be on the lookout for more false breakouts.
Equally, the case for a bounce by cable has something to it in that January saw gains from a similar area to the current one and the price has failed to break below here for four consecutive days. Upcoming significant releases from the USA, primarily inflation and GDP on 11 and 13 March respectively, might give more clarity on possible movements further ahead.
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The opinions in this article are personal to the writer; they do not represent those of Exness. This is not a recommendation to trade.
