The last trading day of the week comes with many economic releases in Europe and the US. However, we will focus on the figures that will be out from the US, which likely to have the biggest impact on the markets ahead of the weekend.
Today, we wait for the first Jobs Report under the new administration in the US. Whatever the figures are, Donald Trump will not take the credit for these figures if they come in with a notable improvement like the ADP this week. If they are negative, Trump would be the first to criticize the Obama administration policies.
In today’s article, we will look at the possible scenarios of the US Jobs Report and give you some tips on how to trade the news.
Estimates
The estimates point to a possible increase of 170K new jobs, while the Unemployment Rate is expected to remain stable at 4.7%. Finally, the Average Earnings may increase by 0.3%. Those are the main figures that everyone is looking at. However, as a day trader, you need to look at the rest of the numbers that matter the most for the Fed.
The YoY Average Earnings is one of these figures, which shows early signs of wages inflation, which in return should have an impact on inflation soon. Therefore, the wages growth figures might overshadow the rest of the numbers.
Employment Components
Looking at some related available data for the month of January, there are many signs that today’s report might come with a notable improvement.
ISM Manufacturing PMI Employment Component posted the highest reading since 2014.
ADP Non-Farm Employment Change posted the biggest increase June of last year.
Philly Fed Employment advanced for the second month in a row rising to the highest level since April 2015.
KC Fed Manufacturing Employment also posted the highest reading since more than two years.
Jobless Claims continued to slide throughout the month posting another historical low around 248K by the end of January.
What Do We Know
As shown above, there are many employment components that showed a notable improvement during the month of January, which increased the odds for a better jobs report later today. However, as noted before, traders need to keep an eye on the wages growth more than the other figures.
Scenarios
If the new jobs and the unemployment data is positive, and wages growth shows a further slowdown, the market will consider this a disappointment. Why? Because it means there is no inflation in wages yet, which will likely to keep the Federal Reserve reluctant to raise rates in the near term. Consequently, the Dollar may lose more ground ahead of the weekend.
Weaker NFP and unemployment data combined with wages coming in higher than expected should lead to a notable recovery in USD across the board as hopes for faster tightening will be back on the table.
In short, wages growth data is likely to overshadow any positive or negative outcomes from NFP or the unemployment rate.
How To Plan Your Trade
First, there is no need to rush; there is always tomorrow.
The first reaction is always tricky, you need to read the news carefully and look at the numbers, analyze them and understand how the market should react to this. You need to ask yourself the following questions
Are the figures positive enough to raise rates in the coming month?
Is this report considered as a very positive outcome?
Are the wages higher than before?
If the answers are “yes”, then you would start planning how you will trade. A “yes” means that the Dollar would rally, which allows you to start looking for buying opportunity. Don’t long on resistance area, wait for a breakout or a test of a support level.
Don’t Forget That USD Index Is Below 100
If your analysis concluded that the jobs report is positive and you are willing to look for buying opportunities against the major currencies, always keep in mind that the US Dollar Index is trading below its solid barrier at 100.0. Therefore, a breakout above that resistance might be a fake-out.
