After a lack of fundamentals on Thursday combined with low liquidity, the big day is ahead of the US, which set to have higher volume and key economic releases.
All eyes are headed toward the US Jobs Report today for the month of March, while the estimates seem to be encouraging.
However, today’s economic releases are very complex, and the impact might be totally different from the market expectations.
|Non-Farm Employment Chg.||174K||235K|
|Average Hourly Earnings MoM||0.2%||0.2%|
|Average Hourly Earnings YoY||2.8%||2.8%|
Looking at the table above, the estimates are somewhat encouraging, but March figures might be softer than February’s massive increase.
However, despite the fact that the estimates point to 174K new jobs in March, this might also come with another surprise higher, just like the ADP Non-Farm Employment Change.
On Wednesday, the ADP Non-Farm Employment Change increased much better than expected, adding more than 263K new jobs, while the estimates were to add 184K new jobs only, posting the biggest monthly increase since June of 2014.
However, traders need to keep an eye and follow the wages growth figures, which remains the key to the Federal Reserve policy for the next few months.
The Average Hourly Earnings is expected to rise by 0.2% in March after rising by the same percentage in February.
However, for the past three months, the MoM Average Hourly Earnings came in with disappointment, which eases the chances for wages inflation. In return, core inflation might also slow down over the coming months, which would ease the chances for multiple rate hikes this year by the Federal Reserve.
Traders need to keep an eye also on the YoY Average Hourly Earnings, which set to remain stable at 2.8% for the past few months.
Wages Growth To Over Shadow NFP
Traders need to be aware that today’s figures are not about the NFP data only. The wages growth remains the key for the time being.
Meaning, even if the NFP comes with a massive increase above 200K, while the wages showed a slight slowing down. Investors would consider the outcomes as a disappointment. In return, the US Dollar might be sold off across the board.
At the same time, if the economy added fewer jobs, while wages showed a surprise higher, this would keep the US Dollar bids until the end of the week, as the estimates will be higher for multiple rate hikes by the Fed later this year.
The Easiest Scenarios For Trading NFP
There are only two easiest scenarios that traders can benefit out of it with no confusion.
- If the figures come clearly positive, such as a notable increase in jobs, lower unemployment rate and higher wages growth. Such figures would be a green light for USD buyers.
- If the figures showed a sudden deterioration across the board, including fewer jobs, higher unemployment rate and slowing down in wages. Such outcomes would be a clear green light for USD bears to step in aggressively.
USD Index Outlook
Looking at the daily chart, the US Dollar index is still trading within a selling zone according to Fibonacci Retracement levels.
The index is trading between the 50 & the 61.8% Fibo retracements from the recent declines as shown on the chart.
The index has been trying to show some strength over the past four sessions, but without any chance, closing the past few days on “Doji”, which means that the fight between bears and bulls is between those retracement levels.
Technically, the bearish outlook remains unchanged as long as the index stays below the 61.8%. Yet, a catalyst is still needed for another leg lower, which might come from today’s NFP.
If the technical outlook is true, then today’s NFP might be considered as a disappointment by investors, which in return might push the US Dollar lower again.
If so, the first immediate support stands at 100.0 barrier, while a breakthrough that supports would clear the way for further declines, probably toward 99.65 followed by 98.85.