Just like any other month, this Friday (the first Friday of the month) will bring into focus the US employment report. Although a lot of attention has been targeted towards the impending Fiscal Cliff, the upcoming non-farm payrolls report is expected to re-highlight US economic fundamentals. Here are some things to consider before tomorrow morning’s release.

Impending Factors

Although the US non-farm payrolls report is usually cut and dry, November’s official figure could be a bit tricky. This is mainly seen as attributed to the after effects of Hurricane Sandy. The storm, which rattled through the Northeast states, disrupted corporate and manufacturing activity throughout the month and may have negatively affected labor market conditions temporarily.

More specifically, US jobless claims figures were visibly affected due to spikes in first time filers throughout the month. November saw an average of 392,000 claims every week, mostly bolstered by a surge in mid-November. During that time employment benefits soared to as high as 439,000. This is considerably larger than an average of 355,000 in the prior two months. Ultimately, the larger number of jobless claims is likely to skew the overall national report at least towards a less than expected release – which lies at 90,000 for the moment.

US monthly employment additions will also likely reflect the ongoing debate over the Fiscal Cliff. Companies unsure of their tax implications and other cost structure considerations are likely to have held back on hiring before the end of the year. The rein in on labor force spending will have negative effects on a season usually supportive of hiring - and good for the US economy.

Trading The Number

As with other economic releases, there are three possible outcomes:

A higher than expected figure would bolster notions of economic stability in the US, allowing for potentially better figures when the 4th quarter is all said and done. As a result, traders should expect an above 90-95,000 release to lend some support for the US dollar across the board. The sentiment plays into the idea of another leg lower in EURUSD, towards 1.2850 support in the near term.

An at figure release could still lend to some US dollar gains as it would be viewed as an improvement over whisper numbers of 86,000. The advance would also be on the premise that Europe remains mired in a contraction, confirmed by the ECB’s downgrade earlier on Thursday. Look for a bearish bias in the EURUSD pair and a target of 1.2850.

The lone bearish outcome, if NFPs are released to below 90,000, would spark concerns that the world’s largest economy may be headed for another difficult year ahead. This would only be exacerbated by speculation that the Obama administration is willing to fall off the Fiscal Cliff – which is expected to shave off approximately 2 percentage points off GDP. The notion would support a correction in the EURUS pair, towards resistance at 1.3100 – and possibly shift the longer term technical outlook.