Employment Data Mixed – Choppy Trading Triggered

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The number of US Non-Farm Payrolls rose by 80K in October. This is below official expectations of a gain of around 100K. On the other hand, the unemployment rate edged down from 9.1% to 9%. These figures are not a huge surprise and offset each other. Figures for August and September were revised to the upside though. 

The dollar reacts with an initial drop against the risk currencies such as the euro.  EUR/USD was trading just under resistance at 1.3838, after an earlier attempt to break higher failed. Another move higher followed the publication but was quickly erased. Reaction is mixed as well, but the dollar edges lower.

Key data:

  • October NFP +80K, a bit under 100K expected.
  • Unemployment rate drops from 9.1% to 9%, better than predictions for no change.
  • September revised significantly from 103K to 158K.
  • U-6 Real Unemployment Rate drops from 16.5% to 16.2%.
  • Average Hourly Earnings rise by 0.2% as expected. Last month’s figure was revised to the upside to 0.3%.

Reactions:

  • EUR/USD Update: the course has changed and the dollar is now strengthening against the euro, although the moves are still limited. The range of reaction is currently 50 pips. This reflects the mixed data and the other ear being on the Greek crisis.
  • Update 13:08 GMT: EUR/USD now extends falls and drops under 1.38.
  • USD/JPY likes the revisions: Dollar/yen often reflects the meaning of US data in a better manner: the pair is on the rise.
  • USD/CAD dropping: Canada had a very bad report earlier – a loss of 54K jobs.
  • Other: GBP/USD slightly up, AUD/USD almost unchanged.

Data from previous months was revised to the upside: the rise in September was revised to a gain of 158K instead of 103K initially reported. This supports the risk rally.

Another piece of good news comes from the “real unemployment rate” which dropped from 16.5% in September back to 16.2% in August.

Real unemployment rate, U-6, is officially described as

“Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force”

Indicators released towards this publication provided hope for a better result. One of the positive signs highlighted in the preview was growth in the employment components in the manufacturing sector PMI and more importantly in the services sector.

It’s important to stress that while this reaction is expected, NFP is one of the most volatile events, that the initial reaction isn’t always the real one, and that confidence vote in Greece (and other debt crisis headlines) are likely to return to center stage very soon, after a slight pause for the NFP.

Here are 5 Notes for Trading the Non-Farm Payrolls.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.