All signs are now pointing to a disappointing Nonfarm Payroll Report this coming Friday, March 7, 2014, as both PMIs and the ADP NFP reports show significantly weaker (or unchanged) employment activities for the month of February due to severe weather conditions. However, the main issue for Forex traders is what will the Federal Reserve do as this could be a third straight month of worse than expected Nonfarm Payroll release that will not only drag down the Employment average significantly, but also calls in the question whether or not Bernanke’s decision into tapering back in December was the right one…
Before we answer that, let’s take a quick look at some of the reasons for a significantly lower NFP forecast this Friday:
As we can clearly see, Employment Index remained unchanged for the Manufacturing sector but dropped significantly for the Non-Manufacturing sector. Considering that the US economy is made up with 79.1% in the services sector, a sharp drop in the Employment index would severely affect Friday’s Nonfarm Payroll report, to say the least. Chief economist Mark Zandi of Moody’s rating agency commented today that:
He went on further and stated that:
In essence, Friday’s Nonfarm Payroll report could come in about 20~30K less than expectation, but still maintain above the 100K conservative estimate, and with Fed chief Yellen having prepared the market ahead with the “severe weather impact” clause during her testimony in front of Congress, I don’t really expect any major shifts in Fed’s policy as a result of the report; as a matter of fact, tapering at measured steps is going to continue, unless NFP were to average below 100K for 6 months or more…
Furthermore, the unemployment rate could remain at 6.6% or lower, judging from the weekly jobless claims. The 4-weeks average now sits around 338.25K, which is essentially unchanged compared to the previous 4-week average… I would still be looking to go LONG on the USD, especially against JPY and CHF (as all three currencies are safe-haven currencies) after the dip as market settles from the shock of a worse than expected NFP release… Of course, if ECB Draghi were to disappoint the market during Thursday’s ECB Press Conference, then you can also add SELL EURUSD to the list.
Ultimately market should settle back and USD will be well supported, the key is to take advantage of this opportunity and position profitable trades .
Nonfarm Payroll Report May Disappoint On Friday…
March 5, 2014 by Leave a Comment