Job Gains To Continue at Same Pace? Non-Farm Payrolls

The U.S. Bureau of Labor Statistics will release the famous Non-Farm Payrolls figure on Friday, April 1st. The numbers aren’t expected to be too amusing though. Despite another expected improvement in the American job market, the big picture isn’t too good. A big leap is necessary for boosting the greenback. Here’s a preview of this important event, including 5 reasonable scenarios and expected currency reactions for selected pairs.

Last month saw a gain of 192,000 jobs, well within expectations. And also now, a survey of economists currently stands on a gain of 195K, very similar to last month. The actual figure could be slightly better, up to 220K won’t be a big surprise.

The estimations for March are based on improved figures seen recently in the US. First and foremost, the weekly jobless claims have stabilized around 380K during this month. This is definitely a good sign, as this figure is a great indicator for the Non-Farm Payrolls.

Also the manufacturing and services sectors, and consumer confidence have been upbeat. The Achilles heel of the US economy continues to be housing, which is almost frozen.

Unemployment Rate gaining traction

But this optimism seen in nice job gains is dampened by the big picture – the official unemployment rate, that surprisingly fell to 8.9%, is still high. It’s expected to remain unchanged now. The “real unemployment rate”, U-6, which also counts people that have given up on the job market is still at an alarming high of 15.9%. Also here, the trend is downwards.

The key to an upside surprise will be the official unemployment rate, which is becoming more and more important.

Reasonable scenarios:

1. NFP between 170K-220K, unemployment rate 8.8%-9.1% – choppy trading without long term impact.
2. NFP 100-170K, unemployment rate 8.8% to 8.9%  – dollar makes limited retreat.
3. NFP under 100K, unemployment rate above 9.1% – dollar falls.
4. NFP 220K-270K, unemployment rate 8.8% – 9.1% – dollar makes limited gains.
5. NFP above 270K, unemployment rate under 8.8% – dollar jumps.

Selected currency pairs to watch.

1. EUR/USD is relatively limited in the range. It move, but in order to get out of the range, an extreme result is necessary in either direction.
2. USD/JPY – The yen is retreating, so the pair will look for the bright side in the US figures, and will likely rise. Only a terrible result will send it down.
3. GBP/USD is relatively vulnerable. A slightly better-than-expected result can send the pound off a cliff. Bad US news will trigger modest gains in cable.
4. AUD/USD is relatively strong. A slightly worse than expected result can send the Aussie to new multi-year highs, while a bad result can be shrugged off by the Aussie.

Non-Farm Payrolls continue to be the No. 1 event for forex traders, and it has special characteristics. I recommend reading the 5 Notes for NFP Trading.