– U.S. Non-Farm Payrolls to Climb 197K, Unemployment Rate to Hold at 7.0%
– NFP Exceeded Market Expectations the Last Two Consecutive Prints

Trading the News: U.S. Non-Farm Payrolls

U.S. Non-Farm Payrolls (NFP) are projected to increase another 197K in December and a better-than-expected print may heighten the bullish outlook for the dollar as it raises the Fed’s scope to further normalize monetary policy over the coming months.

What’s Expected:
Time of release: 01/10/2014 13:30 GMT, 8:30 EST
Primary Pair Impact: EURUSD
Expected: 197K
Previous: 203K
DailyFX Forecast: 190K to 210K

Why Is This Event Important:

A pickup in job growth may spur a further shift in the policy outlook as the Fed starts to wind down its asset-purchase program, and the central bank may take a more aggressive approach in moving away from its easing cycle as the economic recovery gathers pace.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ADP Employment Change (DEC)

200K

238K

ISM Non-Manufacturing (Employment) (DEC)

—

55.8

ISM Manufacturing (Employment) (DEC)

—

56.9

In light of the positive developments coming out of the U.S. economy, the data certainly raises the scope of seeing NFP top market expectations, and a strong print may spark a near-term rally in the greenback as it raises the outlook for growth.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Consumer Credit (NOV)

$14.250B

$12.318B

Domestic Vehicle Sales (DEC)

12.59M

11.65M

New Home Sales (MoM) (NOV)

-0.9%

-2.1%

However, the persistent slack in the real economy may push businesses to scale back on hiring, and a weak NFP print may trigger a more meaningful correction in the greenback as it dampens bets for another taper at the January 29 meeting.

How To Trade This Event Risk(Video)

Join DailyFX on Demand for Full Coverage of U.S. Non-Farm Payrolls

Bullish USD Trade: NFP Rises 197K+; Unemployment Holds or Falls from 7.0%
Need to see red, five-minute candle following the print to consider a short trade on EURUSD
If market reaction favors a long dollar trade, sell EURUSD with two separate position
Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: U.S. Employment Falls Short of Market Forecast
Need green, five-minute candle to favor a long EURUSD trade
Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release

EURUSD Daily

Chart – Created Using FXCM Marketscope 2.0
2008 Downward Trend Remains Intact; December Range at Risk
Bearish Relative Strength Index Remains in Focus
Interim Resistance: 1.3800 (100% expansion) to 1.3830 (61.8% retracement)
Interim Support: 1.3490 (50.0% retracement) to 1.3500 Pivot

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the last month

Period

Data Released

Estimate

Actual

Pips Change
(1 Hour post event )

Pips Change
(End of Day post event)

NOV 2013

12/06/2013 13:30 GMT

183K

203K

+34

+60

November 2013 U.S. Non-Farm Payrolls

Last November’s NFP beat concluded an incredible week in data out of the U.S. despite a U.S. government shutdown in October. This was leading up to the December FOMC meeting in which the Fed decided to finally taper asset purchases by $10B. Although the print came in better than estimated, the October print of 204K was revised down to 200K. Although the greenback strengthened slightly with EURUSD spiking lower, the Dollar lost strength into the end of the trading day and did not find much support against the Euro until the FOMC taper decision days later. Now with the Fed shifting policy to reduce asset purchases in 2014, continued strong employment data may push the Fed to pull back the reins on QE3 in a consistent manner. As for insight into this print, ADP Employment Change figures for December came in better than expected and contributed to Dollar strength and higher US Treasury yields.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

Trade Alongsidethe DailyFX Team on DailyFX on Demand

Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.

New to FX? Watch this Video

Join us to discuss the outlook for the major currencies on the DailyFXForums

Source: Daily fx