EUR/USD collapsed on US non-farm payrolls

Euro tumbled to six-week lows against the US dollar on Friday, following the release of optimistic employment data from the United States, which bolstered expectations that the Federal Reserve Bank will reduce the scale of its stimulus policy in a short term.

EUR/USD pair collapsed to 1.2812 at 12:31 GMT, currently the session low and the lowest point since May 17th, after which consolidation followed at 1.2836. The cross erased 0.63% for the day. Support was expected at May 17th low, 1.2796, while resistance was likely to be met at current session high, 1.2917.

The Bureau of Labor Statistics in the United States reported minutes ago, that US economy managed to add 195 000 new job positions in June, significantly above the expected number of 165 000, while in May another 195 000 jobs were added, according to revised data. These results submitted a clear signal that US labour market was recovering at a steady pace. This increase in June came even after data in April and May was revised up. Non-farm payrolls in US increased by an average value of 189 000 every month this year through May. They rose in 2011 and 2012 by an average of 179 000 per month, the Labor Department stated.

“These are really strong numbers, and there was an expected strong dollar response across the board,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview, cited by Bloomberg.

On the other hand, Unemployment Rate in the United States remained unchanged at 7.6% in June, compared to May, while experts had projected a decrease to 7.5%. These recent indicators from US formed expectations that economy could expand at a faster pace during the second quarter of this year. As the overall picture has begun to improve, the Federal Reserve Bank of the United States could probably embark on a scale back of its 85-billion-USD-per month easing program.

As a response to the above mentioned numbers, the dollar index, which tracks the performance of the US dollar against a basket of six other major currencies, jumped to the highest level since July 13th 2010, reaching 84.77 at 13:01 GMT.

At the same time, the euro was under ongoing pressure after European Central Bank President Mario Draghi said on Thursday the bank policymakers will maintain interest rates at current levels for an “extended” period of time, which, actually, could also mean a possible reduction in rates. In addition, earlier on Friday it became clear that German Factory orders showed surprisingly weaker than expected results in May, as domestic demand chilled expectations of a further expansion in investments. On a monthly basis, factory orders declined by 1.3% in the month of May, confounding initial estimates of a 1.2% increase, while in April the indicator marked a 2.2% decrease. Speaking in annual terms, factory orders in Germany dropped by 2.0% in May, deteriorating in comparison with Aprils drop of 0.3%. Aprils data was revised up from -0.4% previously.