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Nonfarm Payrolls (NFP) in the US increased by 49,000 in January, the data published by the US Bureau of Labor Statistics showed on Friday. Wind was taken out of the USD’s sails following the report. Analysts at TD Securities view this as an opportunity to fade, however, and remain focused on the downside in the EUR/USD pair.

Key quotes

“Payrolls were +49K in January, weaker than expected, and December was revised to -227K from -140K. More positively, unemployment fell to 6.3% from 6.7%, but, overall, the report disappointed. It shows modest double-dipping stalling after COVID-19 cases surged and new restrictions were put in place.”

“A rather underwhelming print to payrolls has significantly taken the wind out of the USD’s sails, denting a US exceptionalism theme that has been emerging recently. We think this development is a notable one in what could be a sign of a currency market returning to a more traditional reaction function driven by relative growth and data differentials.”

“We think markets are putting stock in the idea that the Democrats will deliver a larger package than what could otherwise be the case on a bi-partisan basis. On that front, we are inclined to fade dips in the USD post data as we think it will be difficult to ignore the rate dynamics which are likely to be driven by fiscal prospects.”

“The US has picked up the pace on its vaccine rollout while several of its major peers like Canada and the EU continue to struggle on that front. We think that will lead to a later recovery for those economies, especially the EU. Indeed, the US has been at the forefront of positive market revisions to the growth outlook compared to many of its industrialized peers. This, alongside our expectations for US rates, has us focused on the downside in EUR/USD targeting a move to 1.18.”