Fundamental Insight: Tomorrow’s Nonfarm Payroll figures and Unemployment rate are key for the US Dollar

Tomorrow is probably one of the most important event days of the month as we have Nonfarm payrolls and Unemployment rate data to be released in the NY session. It can also be considered as one of the most important NFP releases as solid job numbers would crystallize the speculation of Fed to start reducing the asset purchases from the next meeting.
Market is expecting a better outcome this time compared to the last month.

Nonfarm Payrolls has been very steady from the last couple of months as can be seen the chart below. However, there was a decline in last two months in the number of newly employed people, which somehow weighed on the US Dollar. This is the reason why this month measure is very important, and any further decline would push fed a step back and might refrain to start QE taper from the next meeting. Personally, I do not feel NFP outcome would be discouraging this time around.

Fed has reiterated from time to time that they want Unemployment rate to get steady below 7% for them to stop asset purchases. Unemployment rate has been constantly dropping from past several months as shown in the chart below. Any surprise to the downside will further encourage Fed to start QE tapering sooner or later.

Now, let us discuss how to trade this event, and the best opportunities in the market. In my opinion, there can be two scenarios this time around.

First – Around or above expectation (NFP 170K or above and UR 7.4% or below)
In this case, I would prefer selling EURUSD or NZDUSD, depending on which of the two is trading higher intraday.
Looking at the 4 hour chart of EURUSD selling from levels such as 1.3240/80 can be an option with a stop above 1.3320.

Second – Below expectations (NFP below 170K and UR 7.4% or above)
In this scenario, I would prefer buying AUDUSD or sell USDJPY.
Looking at the 4 hour chart of AUDUSD buying from the support areas as plotted on the chart below can be an option with a stop below last support.

Trade very carefully friends as I feel NFP will definitely bring a lot of volatility tomorrow.

Post your predictions below if you like. Cheers!

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