Less Expectations, Stronger Impact? Non-Farm Payrolls Preview

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Non-Farm Payrolls hold fewer expectations, after the past two disappointment. What’s expected, and how will the dollar react? Here’s a preview for the king of forex.

This time, the indicators leading towards the Non-Farm Payrolls aren’t as great as last month, but the US economy is still improving. Weekly job claims have had some setbacks. One rise was blamed on a week of heavy snow, and one on seasonal adjustments, but also the most recent and improved figure of 415K failed to breach under 400K.

Hope can be found in the purchasing managers’ indices, that suggest that maybe a figure of 200K in the NFP can be expected. Manufacturing PMI rose above 60 points, which shows a fast pace of growth. Also the services sector exceeded expectations and reached 59.4 points. The big question is if companies began hiring massively, or just reduced firing. The latter is probably more correct.

Market consensus is for a job gain of 150K, with the unemployment rate staying unchanged, or with a small rise from 9.4% to 9.5%.

The focus will be on the headline NFP number, unless the unemployment rate rises to 10% or drops below 9%.

I believe that we’ll see a significant upwards revision of last month’s disappointing figure, that wasn’t inline with other indicators such as the ADP survey for the private sector. We’ve seen upwards revisions last month as well.

Forex Impact

Apart from the usual choppy trading, I think that a figure of over 200K will boost the dollar, while a figure of under 100K will send it to a weak close of the week. But not all currencies are born equal:

  • EUR/USD is currently more vulnerable, especially due to the press conference of Jean-Claude Trichet, that didn’t raise his tone against inflation. His previous hawkish stance gave a big boost the Euro. A good NFP could send the Euro way down.
  • GBP/USD: The British pound is currently more resilient – recent PMIs in Britain managed to erase the bad news from the GDP. It could suffer less drops on a good NFP.
  • AUD/USD: Regarding the Australian dollar, after Yasi is behind us, the Aussie is now free to enjoy rising commodity prices. A good Non-Farm Payrolls result in the US could even boost the Aussie on risk appetite – stronger global growth means more appetite for commodities, especially copper, and this could aid AUD/USD.

It’s also important to remember that the Egyptian situation isn’t over. Last Friday, after the prayers, the situation deteriorated and the dollar rose. Also this time, protests following the prayers could get out of control and impact currencies, even when Non-Farm Payrolls are released. There’s fear of civil war in Egypt.

In any case, this event is very volatile, and should be traded with special care (or avoided if you’re a newbie). So, please read the 5 Notes for Non-Farm Payrolls Trading.

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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 a 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.