How to trade the Nonfarm Payrolls of July 03rd 2014 ?
Markets’ attention will turn to Thursday Nonfarm payrolls report in U.S. looking for signs on economic recovery in U.S. The US Non Farm Payrolls publication is considered as one of the most important indicators which determine the health of the world’s largest economy.
Notice : The report will be released on Thursday instead of Friday due to 4th of July independence day in U.S.
Accordingly, the expected reaction scenarios will be as follows:
1/ within
expectations:
The economic analysts expect
that the US
labor market will add only 212,000 new jobs less
than the previous reading 217,000 while the
unemployment rate is expected to remain unchanged at 6.3%
As the recent dovish
comments from the head of the Federal reserve bank, have added more uncertainty
about the recovery of the US
economy. In fact, Yellen claimed on the FOMC meeting of June 18 that the Fed
may keep the interest rates at lower levels for longer period of time. In
addition, the US
GDP growth shrunk to 2.9% during the first quarter of this year
2/above expectations:
If the NFP data will
surprise the market and rise above expectations or above the previous reading, we will see a rebound
of the U.S. dollar. As an upbeat data may encourage the Fed to continue
reducing the monthly asset purchases in the next months. And the bank may hike
its interest rates decision sooner than anticipated.
3/below expectations:
The NFPs can drop below
expectations , means below 212,000 jobs , it
would negatively affect the U.S. dollar
, and can push the monetary policy
makers to review the Fed monetary policy
decisions, so It would represent a negative signal and show that
the US economy remains vulnerable.
On the other hand, today
the dollar dropped sharply against a basket of major currencies,
due to the release of mixed data which raised doubts and worries about the
strength of recovery of the world’s largest economy.
As a result, a high
volatility is expected on Thursday July 03rd, as the market will
witness the release of 2 major events on the same day; the US nonfam jobs
report and the ECB monetary policy meeting, so we recommend the investors to
remain cautious in their trading and to enter stop loss orders.
