As we start a new trading year, one of the important questions, which is circling in the market right now is whether there will be another impressive gain in the US Nonfarm payrolls or not? The last two readings for the Nonfarm payrolls were impressive with gains of around 200K jobs, which was one of the main reasons why the fed considered tapering in December. The $10B reduction in the asset purchases gave some reasons for the US dollar bulls to cheer.
Today’s Nonfarm payroll figures also holds a lot of importance, as it will help us analyze further that additional reductions in the QE from the fed is possible in the coming meetings or not. The recent FOMC meeting minutes highlighted the fact that the strong labor market was one of the main reasons for the tapering in December. So, another impressive gain in the NFP may push the US dollar higher again in the short to medium term.
There are several analysts and economists who have raised the expectations of a better outcome. The market is now expecting a minor decline from the last reading of 203K to 195K. The expectations of the market are high, and that is the reason if the data disappoints, then we may see some pressure selling in the US dollar later during the day. I am not suggesting a theory, but I have noticed that after two successive jumps in the NFP causes a fall third time, as can be seen in the chart below. So, I am not sure whether we can witness a better reading this time. However, the recent data like the ISM manufacturing PMI and ADP nonfarm employment change suggests that we may have something interesting in store this time.
Another important thing to note here is that the last unemployment rate reading was also very surprising. There was a 0.3% fall from 7.3% to 7.0%, which is the lowest in the last couple of years. The chart below shows the complete picture and recovery in the US. The market is expecting the unemployment level to remain at 7.0%. I do not think that we can see another decline from here so soon, but you never know. A rise or revision in the last reading may be negative for the US dollar for sure.
So, key point to note here is that any stable or better data like around 200K jobs and 7.0% unemployment rate should see the fed continuing the tapering in the coming meetings. On the other hand, any major disappointment may push the expectations for some time, which should be the dollar negative, in my opinion.
Furthermore, we have the Canadian employment data on tap as well. The Canadian dollar has been declining for the last several weeks. Let’s see whether the upcoming data can help the currency to recover some ground or not.
Technically, the EURUSD after the ECB press conference yesterday fell to test the 1.3550 area. However, the pair recovered some ground later during the day. The pair is trading in a triangle, as can be seen in the 4 hour chart shown below. There is a critical resistance at around the 1.3650 level, and supports at around the 1.3540 and 1.3520 levels. Let’s wait and see whether the pair manages to break this triangle after the data release.
Some of the other pairs like AUDUSD and NZDUSD are trading lower, and if the data disappoints, then there are chances that these pairs can recover some lost ground and trade higher. The 0.8960 level in the AUDUSD is an important resistance level.
So, keep an eye on these levels, and plan your trades accordingly.
Get my Daily Market forecast with trade opportunities HERE: Vladimir’s Markets Forecast
Happy Trading Friends!
