What Matter’s In Today’s US Jobs Report

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Another big day is ahead of us as we all wait for a confirmation of a possible rate hike during the Federal Reserve meeting in March.

All eyes today are headed toward the US Jobs Report, which will be released at 13:30 GMT+, where the Non-Farm Payrolls, Unemployment Rate, and the Average Hourly Earnings will be released from the US.

Traders need to plan their trade before such news as once the figures are announced, the market impact is usually massive.

Let’s start with a look at the expectations:

Indicator Forecast Prior
Non-Farm Employment Change 190K 227K
Unemployment Rate 4.7% 4.8%
Average Hourly Earnings MoM 0.3% 0.1%
Average Hourly Earnings YoY 2.5% 2.5%
Participation Rate 62.9% 62.9%

Looking at the table above, the figures seems to be encouraging, which means that the report is likely to keep the Federal Reserve on course to raise rates at March’s meeting.

However, there are many factors involved in today’s report and for the Federal Reserve meeting.

What Matters The Most In Today’s Jobs Report

First, the new jobs created are no longer matters as the long-term trend is stable and the US economy is adding around 180K each month since more than two years.

What matter’s the most in today’s figures is the wages growth. Moreover, you need to keep an eye on the YoY Average Hourly Earnings and not only the MoM. This is what most of traders miss in every jobs report.

Many ask why the Dollar went down last month despite the fact that the US economy added more than 220K new jobs. Well, the quick answer is because the wages growth slowed down.

The Federal Reserve need to see higher wages on the longer term in order to support inflation, which in return would give the Federal Reserve more room to raise rates.

As long as there is no wages inflation, this means that the core inflation will be at risk to slow down, which would push the Federal Reserve away from raising rates.

Fed Fund Futures At 100%

The recent economic releases from the US in addition to the remarks of the Federal Reserve’s members have pushed the Fed Fund Futures for March meeting to 100%. This means that the market it 100% sure that the Fed will raise rates in March.

However, this can be easily changed, especially if today’s figures came in with disappointment.

Wages to Overshadow NFP and Unemployment Rate

You have to keep in mind that even if the NFP and the unemployment rate came in much better than expected, while wages slowed down, the US Dollar is likely to decline across the board, as estimates will change regarding the Federal Reserve rate hike.

On the other hand, a disappointing unemployment rate and new jobs, while wages picked up, the US Dollar may turn around and continue to rise further, as the market would assume that the disappointing data will change next month and likely to recover today’s possible disappointment.

USD Outlook

The US Dollar Index remains at a key resistance around 102.00, which we talked about many times in our previous reports.

The potential head and shoulder pattern is still a possibility, but it needs a catalyst, which might come from today’s jobs report.

Our bearish outlook remains as long as the index continue to trade below the Head which stands around 103.00.

Only a weekly close above that resistance would lead us to change the outlook to strongly bullish.

On the downside view, another leg lower supported by lower wages and declining estimates for a rate hike in March by the Federal Reserve might push the index below 101.0 in the coming hours, while 100.50 remains a solid support area on the short term.

Mind your risk, read the news carefully when they are out, plan your trade and execute with tight stops.

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