This Friday will see the release of the latest US jobs numbers, which could lead to increased volatility in markets. While traders have been focused on the on-going trade talks, tomorrow´s numbers will be important, as the rate path is not particularly clear, and the Federal Reserve is currently waiting for more information in order to decide if another rate cut is needed. Should we see weaker than expected numbers, the pressure on the central bank to further reduce interest rates will increase, especially if the trade talks between the USA and China are either delayed or cancelled. A better than expected figure should help to boost the Greenback, which has been struggling in the past two weeks.
The ADP Nonfarm Employment Change should not be used to predict what the NFP numbers will be like, but it can indeed be used as a gauge. Based on that, tomorrow´s figures could be slightly disappointing, as the latest figure arrived at 67,000 vs 140,000 expected.
The market is looking for a 180k print, compared to 128k in the previous month. Dollar bulls are in need for a strong number, as weak manufacturing data and the on-going trade disputes are weighing on the currency.
The unemployment rate is likely to remain unchanged at 3.6 %, in line with the market expectations.
Average Hourly Earnings
The average hourly earnings are likely to have increased 0.3 % month-by-month in November, compared to 0.2 % in October. Traders should not only pay attention to the NPF figure, but also to the earnings numbers, as it is something that the Federal Reserve is watching closely as well.
Charts to Watch
The Dollar has been under pressure lately. However, strong employment data could help the currency to gather momentum and reverse the short-term trend. One currency pair to watch is USD/JPY. It is currently testing the 200 DMA, and bulls are eyeing the 109.70 resistance level as next target.
How to Trade the NFP numbers
Trading on news releases is not an easy task, and traders need to be aware of the risks. There are likely to be rapid market movements and traders could experience slippage when entering market orders. Good risk management is therefore crucial.
How do traders trade the NFP data release?
Most traders choose to either fade the initial move or to go with the trend. Fading the initial move means that the trader would wait for the initial reaction to the news release, and then take a trade in the opposite direction. The idea behind is that markets often overreact to particular news/data, and a retracement could be expected.
Other traders might prefer to go with the trend – i.e. they assume the initial market reaction was correct and there will be an extension of the rally/decline. Some traders make use of technical indicators or simply watch price action to get a feeling for the market, and if the initial move was an overreaction or not.
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Two-year yields have covered their prior six-month range in the last week alone – and whether or not this move is sustainable matters a lot