US April NFP Preview

May 06, 7:33 am
NFP_March nonfarm payrolls

The US nonfarm payrolls data will be released today by the Bureau of Labor Statistics at 12:30 GMT. Heading into the event, the consensus estimates for the month of April are as follows:

  • Monthly Nonfarm payrolls: 203k – 200k
  • Unemployment Rate: 5.0%
  • Average hourly earnings m/m: 0.30%

Previous (March NFP Report)

  • Monthly Nonfarm payrolls: 215k vs. 205k
  • Unemployment Rate: 5.0% vs. 4.90%
  • Average hourly earnings m/m: 0.30% vs. 0.20%

In March, US unemployment rate edged higher to 5.0% after falling to 4.90% in January 2016. The uptick in the unemployment rate came as a result of a separate survey of US households which also saw an increase in the labor force participation rate, which increased from 62.9 to 63 in March. Overall, the report was seen to be consistent and did not throw any wild surprises.

April Payrolls Estimates

BNP Paribas: BNP expects “hiring to have slowed a bit in April (to 175k) while a decline in the participation rate is likely to have driven the unemployment rate down 0.2pp to 4.80%.”

Deutsche Bank: DB calls for +175k jobs noting that “Given an expected slowdown in retail hiring and the disconcerting trend in temp. Jobs, we expect a below consensus gain in April payrolls“. DB says that the background data might be important, and they look for a +0.1hr in workweek with a 0.20% average hourly earnings.

Amherst Pierpont: Amherst Pierpont expects +215k job gains noting that hiring was robust in spring in prior years. They estimate an increase in labor force participation rate which could keep the US unemployment rate unchanged at 5.0%.

Barclays: Barclays is of the view that the US nonfarm payrolls will gain 250k, which would beat the average Q1 job gains of 209k. Average hourly earnings are estimated to rise 0.30%, unchanged from March while the unemployment rate is expected to fall to 4.90% from 5.0%.

BofA: Bank of America notes that the US nonfarm payrolls could rise 200k with services driving the core of the job gains and expects the unemployment rate to hold up at 5.0%. On the average hourly earnings, BofA expects a 0.20% month on month increase.

Credit Agricole: CA expects April nonfarm payrolls to rise 190k with the unemployment rate expected to be unchanged at 5.0%.

SEB Bank: SEB Bank expects 180k jobs with a decrease in the unemployment rate to 4.90% while average wage growth is expected to stay unchanged.

Nordea: Analysts at Nordea expects a 200k gain in payrolls with a dip in the unemployment rate to 4.90% with the average hourly earnings forecast to rise 2.40% in March on a year over year basis.

Technical Levels and Outlook – USDX, EURUSD, Gold, USDJPY

NFP - Tech. Levels (US Dollar Index, Gold, EURUSD, USDJPY)
NFP – Tech. Levels (US Dollar Index, Gold, EURUSD, USDJPY)

US Dollar Index: The US dollar index has been rallying for the past three sessions after falling to the lows of 92. A doji close on the daily could signal a potential return of the bulls if Monday is followed by bearish price action. Intraday, there is a hidden divergence which could see a short term correction to 93. As long as the dollar index doesn’t close below 92 on a daily basis, the bias remains to the upside, subject to the dollar index clearing resistance at 94.

Gold: Price action in gold, although weaker clearly shows a lack of moment. Note the bullish pennant pattern which could see a possible move to the upside. Immediate support is as 1275 while a move to 1290 is very likely. Therefore, gold could possibly test 1300 if the momentum helps the rally. Yesterday, gold prices closed in a near doji pattern, and a higher close above the doji’s high at 1286.53 could spell further upside

EURUSD: EURUSD has been declining strongly, but price action has tested the previous resistance now turned to support level at 1.140. 1-hour chart shows a bullish divergence which could send EURUSD to 1.149 – 1.50 levels where prices consolidated before falling to 1.140.

USDJPY: There has been a modest turnaround in USDJPY after falling below 106. Hidden divergence in USDJPY shows a move lower to 106 if the current support at 107 fails. To the upside, 108 resistance will act as a strong level if USDJPY slips below 107.

To summarize, the US dollar could slip in the near term, sending USDJPY briefly lower while Gold, EURUSD could see short term gains. The trend continuation from this initial move could be important because if the momentum stalls, we could expect a return back to the trend, which should see EURUSD, Gold fall while the USDJPY could rise higher.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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