Non-Farm Payrolls Exceed Expectations – Dollar Rises

The Non-Farm Payrolls report for March 2011 showed a gain of  216K  jobs. Early expectations stood on a rise of around 195K. The unemployment rate, which is becoming more important in recent months, is at 8.8 . Estimations stood on 8.9%.

EUR/USD is moving lower in the range following the release, currently at 1.4125, lower than the pivotal line of 1.4160 it traded beforehand. USD/JPY broke above 84 and is now at 84.24. It’s not too far from a very strong resistance line – 84.50. The yen is relatively vulnerable. GBP/USD is falling as well.

AUD/USD is hardly moving – as written in the NFP preview, the Aussie is very strong these days, and only an extraordinary result would hurt it.

Real Unemployment Rate continues falling: Apart from the constant fall in the official unemployment rate, which is boosting the dollar, there’s another figure I’m closely following – U-6, or real unemployment rate. This includes discouraged people.

It’s still at a very high level of 15.7%, but that’s lower than last month’s 15.9% and 16.1% in the month beforehand. This will definitely have an impact on finishing QE2 earlier than expected. You can see it here.

Contrary to previous months, the figures released last month weren’t really revised.

It’s important to note that the initial moves following the publication of the Non-Farm Payrolls don’t necessarily reflect the long term moves, that may be felt only after an hour or two.

EUR/USD traded around the pivotal 1.4160 line before the release. It’s trading in a wide range between 1.4030 to 1.4250 for quite some time. Significant resistance is at 1.4282 – the November peak. Support below the strong 1.4030 appears at 1.3950.

USD/JPY advanced towards the publication. Having conquered the 83.40 line after the Tankan Manufacturing Index and slowed down before 84. Further lines are 84.50 and 82.87.

In the past week, many members of the FOMC made hawkish comments in public appearances. All stated the improvement in the US economy, that is seen in the most sensitive and slow to recover area – the labor market. The gains in jobs and the drops in the unemployment rate join consistent drops in the weekly jobless claims – the 4 week moving average has settled under 400K.

With an improving economy, including the job market, the Federal Reserve can exit the stimulus measures – give up on a third round of quantitative easing (QE3) and perhaps even end the current program earlier than the due date in June.

The most recent comment from  Narayana Kocherlakota, that suggested three rates hikes until the end of the year. Does he want to compete with Jean-Claude Trichet?

Further reading: 5 Notes for Trading Non-Farm Payrolls.