Trading the US Non-Farm Payrolls Report

With ADP reporting higher than expected hiring in the month of December, focus is now turning to an equally positive non-farm payrolls report tomorrow. With evidence that the US labor market is stabilizing, major currencies against the greenback could benefit from a fourth consecutive increase in employment in the US.

What to Expect

US payrolls, according to ADP, rose in the month of December. Behind the uptick in jobs for the month over month comparison, are several factors that additionally support higher employment when the US Labor Department releases NFP figures for the month tomorrow morning.

Initial Jobless Claims – First time claims for unemployment remain bullishly low, with the four week moving average still printing below 400,000. The rolling average witnessed a 11,250 drop to 356,750 last week, supportive of the notion of job growth stabilization. Incidentally, the measure moved only slightly higher to 360,000 following this week’s uptick in claims. Current count continues to remain at the lowest levels in almost 5 years.

Manufacturing Employment Gains – Major employment subindex readings from recent manufacturing survey have shown expansionary gains in the amount of employed. This is in stark contrast to previous readings that the sector was actually shedding positions. The most recent nationwide ISM survey confirmed the figure, rising to a 3-month high.

Plausible Scenarios

At or Above 150,000. With estimates now hovering the 150,000 mark, anything at or above would propel higher beta (or riskier) currencies like the EURUSD. Not only would this mark the fourth consecutive month of six figure employment growth, it speaks well for expansion at the tailend of 2012. Fourth quarter estimated GDP is expected in the 3% range, which would dispel a lot of the skepticism surrounding the US economy.

Between 100,000 to 150,000. Although not as bullish, the median alternative would remain supportive for Euro strength. However, the instantaneous momentum may not be enough to take out formidable resistance via the 1.3200, but rather prop up the currency for a meaningful test.

Below 100,000. The worst case scenario, a lower than 100,000 count would be damaging to current expectations. Not only would it signify labor market weakness, the lower figure would spark fears that companies are continuing to cut head count in anticipation of a domestic slowdown. The scenario would be widely Euro bearish, and likely extend the current weakness towards 1.3100.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.