Trading Guide: April 2013 Non-Farm Payrolls

ADP Employment Report Results

According to the ADP employment report released yesterday, private sector job growth declined once again. It showed that there was a net 119,000 increase in payrolls for the month of April, the smallest gain seen since December 2012.

It appears that the pace of job growth is slowing down due the financial problems of the U.S. government. The recent tax increases and government spending cuts that have been implemented are now hitting the job market, and is causing hiring to weaken across all industries. Details show that employment has significantly declined among companies that hire around 20 to 499 workers.

NFP to Mirror ADP's Weak Reading?

Good things are expected from the upcoming NFP report. It's expected to show that 150,000 net jobs were added in April and that the unemployment rate remained at 7.6%.

In four out of the last six times, the ADP was able to predict the direction of the NFP. When the ADP came in better than expected, the NFP, too, beat forecast. This suggests that the upcoming NFP report could also disappoint.

But if there's one argument against a weak reading, it would be the encouraging initial jobless claims report. Last week, unemployment insurance claims dropped to its lowest level in 5 years, indicating that the job market isn't as weak as we think.

In any case, the NFP report is expected to show that 150,000 net jobs were added in April and that the unemployment rate remained at 7.6%.

Potential Reactions to the NFP

So how will EUR/USD react to the NFP's results? Let's take cues from the last two releases.


Back in March the NFP figure came in TWICE as many as market players had been expecting. The dollar received a huge boost, enough for EUR/USD to break its Asian and U.K. session range and fall by a ridonculous 300 pips during the U.S. session alone.


The Greenback's correlation with the NFP reading can also be seen in April when, like in March, the pair also ranged tightly ahead of the release. Unlike the previous month though, the NFP greatly disappointed and weighed on the dollar. This caused EUR/USD to show an upside breakout to the tune of 92 pips.

Before you bet the farm on these scenarios, you should remember that these are just probabilities. Anything can still happen at the NFP's release tomorrow. All we can do is to conduct proper research and create trading plans for every scenario possible. Think you're up to it?

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