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NFP Snapshot » No Signs of Significant Drop in Employment!

Snapshot of NFP » So far, no signs of a serious reduction in employment!

Are the expectations of the NC justified? We’ll dive into the main leading indicators from Friday’s Critical Works Report below!

Overview of NFP

Last month’s NFP report came out roughly in line with expectations, highlighting the resilience of the US labor market and doing little to counter the Fed’s aggressive rate hikes. The politicians of the world’s most important central bank have repeatedly hinted that they intend to raise interest rates until unemployment starts to rise as much as possible. politics around the world will remain unchanged.

However, there is a hint of uncertainty about the Fed’s next rate decision as CME’s FedWatch tool shows that Fed futures traders estimate there is roughly a 70% chance of another 75 basis point rate hike next month, so we are likely to there will be some market volatility no matter how that month’s job report is printed. Simply put, the stakes for traders are high, no matter what market they choose. The September NFP report predicts 265,000 new jobs will be created and the average hourly wage is expected to rise 0.3% from the previous month:

Source: StoneX

Are the expectations of the NC justified? We’ll dive into the main leading indicators from Friday’s Critical Works Report below!

NFP Predictions

As regular readers know, we focus on four historically accurate leading indicators that help improve the monthly NFP report:

  • The employment component of the ISM Services PMI rose to 53.0 from 50.2 last month.
  • The employment component of ISM’s manufacturing PMI fell to 48.7 from 54.2 last month and is back in contraction territory.
  • The recently revised ADP employment report came in at 208k, up slightly from last year’s upwardly revised figure of 185k.
  • Finally, the 4-week moving average of initial jobless claims fell to 207,000, sharply down from last month’s 246,000 and nearly a decades low.

As a reminder, the state of the US labor market remains more uncertain and volatile than usual due to the unprecedented disruption of the COVID pandemic. However, weighing the data and our internal models, the leading indicators point to readings roughly in line with expectations in this month’s NFP report, with overall employment growth potentially in the 200-300,000 range, but with a larger streak of uncertainty. than ever in today’s global environment.

In any case, the monthly fluctuations in this report are notoriously hard to predict, so we won’t put too much emphasis on forecasts (including our own). As always, other aspects of the release, including the popular average hourly earnings, which was 0.3% m/m in the latest NFP report.

Possible market reaction

Wage < 0,2% м/м Заработная плата 0,2%-0,4% м/м Зарплата > 0.4% m/m < 150,000 jobs US dollar bearish US dollar neutral US dollar slightly optimistic 150-350 thousand jobs USD US dollar bullish dollar is strongly bullish

The US dollar index (DXY) has been declining in recent weeks after hitting a 20-year high near 115.00 at the end of September. The recent pullback has eased the global reserve currency’s overbought condition, potentially paving the way for another uptick as the underlying superiority of the US economy remains the dominant trend.

In terms of potential trade setups, readers may want to consider selling EUR/USD on a strong NFP. The world’s most traded currency pair recently returned to its 50-day moving average EMA, an indicator that has provided solid resistance throughout the year. The psychologically significant parity (1.00) will also serve as a logical zone for a rebound from the countertrend in the stall.

On the other hand, a weak employment report may provide a short-term opportunity to sell the USD/CAD pair. While the overall trend favors the US dollar, USD/CAD is currently holding below last week’s highs and the Canadian could benefit greatly from a larger-than-expected OPEC production cut as oil remains Canada’s most important export.

Matt Weller, CFA, CMT, FOREX.com » Official site

forex.com stock exchange FOMC

Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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