Jarratt Davis

Special Consultant to the FPA
Messages
1,495
Originally updated: 08:00am London Time

Trading Bias:
Neutral

Currency pair:
None

Current Sentiment:
Neutral

In today's trading session we will be focusing on Non-Farm Employment Change and Average Hourly Earnings at 1:30pm London time.

Fundamentals:

NFP is the leading indicator which the Fed are referring to when deciding whether to hike rates.

They've dismissed the dip in inflation as transitory and as such all eyes turn to labour market data which has been improving significantly month after month. We're looking for figures above the key 200k psychological level as an indication of health -there have been rumours of bad weather causing a slightly lower figure than forecast (245k).
If NFP comes in below 200k and Average Earnings drops below 0.2% we could see a big sell-off on the USD for the rest of the session and sessions ahead, as this will cause the market to completely a take June rate hike off the table.
If both figures come out higher this will be one of the final hurdles for the Fed to look back at and consider hiking rates, if this NFP and Average Earnings beat expectations I think the likelihood of a June rate hike is feasible.
The second component is average hourly earnings this is important as it highlights the quality of that employment data, it's no good creating hundreds of thousands of jobs if they are all really low quality low paying jobs – we need peoples earnings to be going up as well.
Last time it was expected to come out at 0.2% and it came out as 0.1%, this time we are expecting 0.2% again. If we get a similar downside surprise on expectations this could send the USD lower, but if we get an upside surprise it will likely cause the markets to start buying the USD across the board.
What we want to be looking for is a combination of NFP, unemployment rate and average hourly earnings where I would go as far to say that average hourly earnings (despite how it is marked on the calendar) is probably the most important, if we get a combination of positive figures on these three data points we could see some real strength on the USD.
If positive you can obviously trade out of the release, don't be too concerned if you feel you've missed the move as there are still pips to be made. Look for positions against the weaker currencies EUR, JPY , AUD.

Technicals:

Remember to be aware of intra-day news as this can very often change the sentiment of the market.

Other Market Moving News:

Today is a bank holiday for many countries around the world, so markets could be more volatile and irrational going into NFP due to less liquidity.

P.S - If you want to learn more about how I trade, check out this link below

Forex Peace Army - Jarratt Davis

 
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