Non-Farm Payrolls: What to expect?

Projections:

(GMT)

Expectations:

On Wednesday ADP Non-Farm Employment showed a growth by 263k new jobs, which is way much bigger than expected 183k. Given that many specialists estimate this like pre-payrolls such a great result can be a signal that we will see something common to this on Friday. Speaking about an unemployment rate and average hourly earnings, forecasts for these indicators are near their average levels for last few month, so I think both projections will be correct or even exceeded (average earnings).

Overall I expect such numbers: Non-Farm Payrolls – 200k+, Unemployment change – 4,7%, Average Hourly Earnings (MoM) – 0,2-0,3% and strengthen of the US dollar.

Also such good labor market data can encourage the Federal Open Market Committee (FOMC) to raise the benchmark interest rate sooner rather than later.

Cons:

A missile attack on Syria weakened the US dollar, especially against the yen and gold. This important event can make the reaction of the market on good labor data more restrained, however, I think that EUR/USD and GBP/USD will not be affected by this occasion (this instrument did not show any rally after the news about Syria). On all other pairs it is necessary to be more conservative.

How to trade:

I advise you not to trade before the payrolls and wait for the market calming down. From 13:45 GMT we can start searching for good entry point. If our scenario is right, short positions for the euro will be in priority. After a strong bearish momentum, we need to wait for some small correction and enter the market. A stop loss should be placed above either the volumetric bearish bar created after the news or the daily maximum (it depends on the strength of the impulse). The target is 1.0550, after reaching it we should move our stop loss to the breakeven. The global target is 1.0500.

The alternative version: “fake” bullish momentum, concentrating of large volume at the top of this impulse after which the price sharply falls (pin-bar or strong bearish momentum). This scenario is even better than the first one. A stop loss should be set above the top of the bullish bar. Targets are the same.

The other version: if the payrolls will be really bad and the price start growing up, we should consider opening long positions only after the breakout of the resistance 1.0695. A stop loss should be set below the breakout bar. The target is 1.0790. But honestly, the scenario with the fall of EUR/USD is more possible to happen.

Hits: 1