NFP Friday Scenarios

Another quarter down and following last week’s Fed remarks on October being in play, tonight’s NFP number takes on added significance.

The September jobs report number is expected to show that the US economy has managed to shrug off external concerns and a recent stock market price action roller-coaster, and continue to print numbers keeping the average moving in the right direction for the Fed to act on.

The Wall Street Journal has a brilliant little fundamental preview featuring the 5 things to watch in the September jobs report. I’ve featured the following chart showing an overview of the NFP numbers month to month with the average in question:

The September USD Non-Farm Employment Change number is expected to come in at 202K, an improvement on August’s 173K. The Unemployment Rate is also expected to hold steady at 5.1%.

With August’s print being the second weakest month of job creation for the calendar year, the above average is sure to attract some attention.

Trading Scenarios:
1. If Non-Farm Payrolls print greater than 200K + the Unemployment Rate stays steady as expected, the USD is expected to rally as the likelihood of a rate hike in 2015 will rise.

2. If Non-Farm Payrolls print less than 200K + the Unemployment Rate stays steady, or worse falls, the USD is expected to drop or more likely plateau as expectations on a 2015 Fed hike are already quite low.

With futures markets pricing in only a 16% chance that the Fed hikes in October and an equally dismal 43% that they move in December, anything that beats expectations is likely to have a greater impact on the USD than a miss.

USDX Daily:

Stay safe out there.

On the Calendar Friday:
CNY Bank Holiday
AUD Retail Sales m/m
EUR ECB President Draghi Speaks

GBP Construction PMI

USD Average Hourly Earnings m/m
USD Non-Farm Employment Change
USD Unemployment Rate

Chart of the Day:
Across into the realm of Commodities Trading for today’s chart of the day.

Oil Daily:

After speaking about oil last week, one week later and price is still capped by the descending trend line. We were looking for the market to find some sellers as price approached trend line resistance and then to find an opportunity to short as it fell through the marked zone.

The setup has now reached its now or never moment. Trade the reaction or let it go with sideways chop expected if the trend line isn’t able to break or hold with a momentum type move from here.