How to trade the Nonfarm Payrolls of July 03rd 2014 ?

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.

MBCFX Forex & CFDs Brokerage Firm