US BLS data due Friday at 12:30 GMT is expected to show July Nonfarm Payrolls rising to 80K after 57K in June. The unemployment rate is forecast to hold at 4.2%, while annual wage inflation via AHE is seen unchanged at 3.5%. Deutsche Bank forecasts +65k payrolls versus +57k, with private payrolls at +65k after +49k; it sees unemployment at 4.2% but with a risk of 4.3% if participation rebounds. It also projects AHE at +0.3% month-on-month, unchanged from June, and average hours worked steady at 34.3. BNY Mellon points to an implied \u201cbreakeven\u201d pace of about 50,000 jobs a month to prevent unemployment rising, given slower labour force growth than before the pandemic.<\/p>\n\n
Market pricing for a 25 bps Fed hike in September has eased, with CME FedWatch at 55% versus about 70% at end-July, after crude Oil rose more than 20% in July before falling in August on optimism over the Strait of Hormuz. A payrolls print below 40K is framed as a downside surprise that could soften the USD and lift EUR\/USD, while more than 100K would imply firmer US activity and weigh on the pair. For EUR\/USD levels, RSI is above 60, with resistance cited at 1.1570, 1.1630 and 1.1800, and support at 1.1475-1.1440, then 1.1360 and 1.1280.<\/p>\n\n—\n\n
Today we are looking closely at the July Nonfarm Payrolls release, which is expected to rebound to 80,000 from June’s weak reading of 57,000. This highly anticipated data point comes as market participants reassess whether the Federal Reserve will raise interest rates in September. We believe derivative traders should prepare for heightened volatility in the foreign exchange and interest rate options markets as this data hits.<\/p>\n\n
If we see a weak payroll print below 40,000, it will likely fuel the narrative of a cooling labor market, dragging the US Dollar down and boosting EUR\/USD. In this scenario, we recommend buying short-term EUR\/USD call options to capitalize on a potential breakout past the key 1.1570 resistance level. Historically, similar downside surprises in US payroll data have triggered rapid 100-pip shifts in major currency pairs within the first few hours of trading.<\/p>\n\n
Conversely, an upside surprise above 100,000 jobs would signal a resilient labor market, strengthening the case for a September Fed rate hike. Under these conditions, we expect the US Dollar to rally, making EUR\/USD put options or short futures positions highly attractive. Recent CME Group FedWatch data shows the probability of a September hike sits at 55%, leaving plenty of room for a sudden hawkish repricing if the job market outperforms.<\/p>\n\n—\n\n
We must also monitor the recent decline in crude oil prices, which have dropped back from their July peaks of over $80 per barrel to ease broader inflation fears. This slide in energy costs reduces the pressure on the Fed, meaning any USD downside from a weak NFP could be amplified if oil continues to fall. We should use structured options strategies like straddles to trade this dual uncertainty of employment data and shifting energy markets.<\/p>\n\n
On the charts, we are watching key technical markers for the EUR\/USD, specifically the 100-day Simple Moving Average at 1.1570 and the 200-day SMA at 1.1630. A daily close above these levels would confirm a bullish trend reversal, providing a clear signal to run longer-duration long positions on the euro. Until these barriers are broken, we suggest keeping downside protective stops tight around the 1.1440 support zone.<\/p>\n\n\n\n