Nonfarm Payrolls preview: no fireworks, but lots of trading opportunities

Another US Nonfarm Payroll report is just around the corner and would dare to say, the market hasn't been waiting for it so anxiously as it is now, in a long time. For several years, a healthy employment sector had made of employment data less relevant in terms of monetary policy decisions, with wage growth, more linked to inflationary pressures, sometimes having more weight than the headline figure, when it came to taking trading decisions.

Market's forecast point to 180K new jobs added in March, following the horrid 20K from February. The unemployment rate is foreseen steady at 3.8%, but with the participation rate seen decreasing from 63.2% to 62.9%. Average Hourly Earnings are expected to have risen by 0.3% MoM and by 3.4% YoY, in-line with February readings.  Results matching these forecast will likely be quite positive given the previous numbers, but will hardly be a reason to jump into USD longs.

With wages still on the rise, a second consecutive worst-than-expected headline could have a negative impact on the market, as it will confirming a slowing pace of jobs' growth for this year. There's a small light of hope: the decline in February could be the echoes of January's government shutdown, and a good number in March will make market participants forget quickly about it.

Data released ahead gave mixed clues, as Thursday's data showed that for the last week of March, unemployment claims fell to 202K, the lowest in almost five decades. Challenger Job Cuts also provide some encouraging hints, as US-based employers announced plans to cut 60,587 jobs from their payrolls in March, down 21% from the 76,835 cuts announced in February. Still, the quarterly cuts reached the highest since Q3 2015.

The latest Markit Manufacturing PMI showed that, despite the moderate improvement in operating conditions, the rate of job creation in the sector remained solid despite broadly unchanged levels of outstanding business. The Services PMI, however, showed that the rate of job creation slowed to the weakest since May 2017.

Anyway, unless there is another reading as horrid as the one from February or a shocking upward surprise that surpasses the 250K, don't expect fireworks.

Major pairs' probable reactions

The EUR is among the weakest, which means that, even in the case of a poor US employment report, chances of a solid advance are quite a few. A terrible report could prompt some profit taking from the latest USD rally, therefore help the pair advance. The upward move, however, could be short-lived.

When it comes to the JPY, the latest data coming from Japan indicate a steepening economic slowdown in the world's third-largest economy. A better-than-expected US employment report will likely fuel the dominant USD bullish trend, also back Wall Street, and result in the USD/JPY gaining further ground. The downside in the case of a miss will gather momentum if the pair losses a key static support at 111.20.

Forget about GBP/USD, as chances of action there, triggered by something different than Brexit drama are almost null.

Canada will also release its monthly employment figures, and there is a more clear chance, as divergent outcomes, as it happened before, could trigger some interesting directional moves.

The AUD/USD pair is more likely to react to a positive US report than to a poor one, as buyers seem reluctant to push the pair higher, but to the downside, there's room for a test of the lower end of the latest 2-month range at 0.7000.