The U.S. labor market report published on Thursday turned out to be quite contradictory, although the market interpreted it in favor of the American currency. Looking ahead, it is worth noting that despite the optimistic reaction from traders, selling EUR/USD still appears to be a risky strategy — maintaining long positions on southern price pullbacks remains a priority. Essentially, the June Nonfarm Payrolls did not alter the context of the July FOMC meeting. The release merely confirmed that the interest rate will remain unchanged at least until September. However, the market was already fully convinced of this even before the report, following Jerome Powell's statements in the U.S. Congress and at the Sintra economic forum.
According to data released on Thursday, the unemployment rate in June decreased to 4.1%, down from the previous rate of 4.2%. On the one hand, this is a minimal decrease of just 0.1%. But on the other hand, unemployment had remained flat at 4.2% for three consecutive months (from March to May), and most analysts had forecast an increase to 4.3% in June — the highest since July of last year.
Another important indicator also came in "green." The number of jobs in the nonfarm sector increased by 147,000 in June, against a forecast of 120,000. Again, it's a matter of perspective. On the one hand, the figure still fell short of the 200,000 benchmark, although it did exceed expectations. On the other hand, for the third consecutive month, the figure remained roughly the same (147,000, 144,000, 147,000), reflecting the stability of the U.S. labor market.
The disappointing ADP report also played a role — it unexpectedly came in negative. Instead of the projected 100,000 gain, the actual figure was a loss of 33,000. Against such a "preview," the June NFP report appears relatively solid, although the increase in private-sector jobs (excluding government employment) did land in the red: 74,000 versus the projected 110,000.
The wage component also came in weaker. Average hourly earnings growth slowed to 3.7% y/y (most analysts had expected an increase to 3.9%). This metric has declined for two consecutive months.
Likewise, the labor force participation rate fell for the second straight month, declining in June to 62.3% — the lowest since November 2022.
Overall, the June report reflects the resilience of the U.S. labor market. Job growth is steady but at a pace consistent with the annual average (146k). This suggests the labor market is gradually slowing but not weak. The report's structure reveals that the public education and healthcare sectors are the primary drivers of growth, indicating a shift away from the private sector's strength. Wages are growing at a moderate, slowing pace, with no signs of inflationary overheating.
In other words, the Federal Reserve received a "green light" on Thursday to maintain the status quo at the July meeting. However, even without the NFP, the market was nearly certain that the Fed would keep everything unchanged this month. As for the next meeting in September, it's still too early to make forecasts. Ahead lie two more labor market reports (July and August NFP) and several inflation reports (CPI, PPI, PCE). Nevertheless, the data have somewhat weakened dovish expectations for September. For instance, on Wednesday, the probability of a rate cut in early fall stood at 95%, but it has now fallen to 70% (according to the CME FedWatch tool).
Despite the slight "recalibration" of market expectations, selling EUR/USD still looks risky. Despite a southern impulse, the bears failed to break even the intermediate support level of 1.1730 (the lower line of the Bollinger Bands on the H4 chart). At the same time, buyers quickly attempted to return to the 1.18 area, indicating weak selling pressure on EUR/USD — even though the ISM Services PMI, published a few hours after the NFP, returned to expansion territory (50.8).
The dollar remains under pressure amid fiscal and trade risks. The highly controversial tax-and-budget package ("One Big Beautiful Bill") has returned to the House of Representatives and is close to becoming law, while the "preferential tariff period" is nearing its end (July 9). This information backdrop prevents the bears from developing a sustainable downtrend, indicating that we are witnessing a correction rather than a trend reversal.
On the daily chart, the pair remains between the middle and upper lines of the Bollinger Bands and above all lines of the Ichimoku indicator (including the Kumo cloud), indicating a bullish "Parade of Lines" signal. In my view, the current situation is suitable for opening long positions with targets at 1.1790 and 1.1830 (the middle and upper lines of the Bollinger Bands on the H4 chart, respectively).
