Trading Outlook – Neutral

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Originally updated: 07:00

Trading Bias: Neutral

Currency pair: None

Current Sentiment: Bullish

In today’s trading session we will be focussing on Non-Farm Employment Change and Average Hourly Earnings at 1:30pm London time.

Fundamentals:

NFP is the leading indicator which the Fed are referring to when deciding whether to hike rates.

They’ve dismissed the dip in inflation as transitory and as such all eyes turn to labour market data which has been improving significantly month after month. We’re looking for figures above the key 200k psychological level as an indication of health -there have been rumours of bad weather causing a slightly lower figure than forecast (235k).

If figures are negative don’t be too eager to jump into any USD shorts be sure to do your research to ascertain the reasons why. If a dip in figures gets attributed to the weather this is very temporary and as such nothing to be too concerned about, I don’t expect any big USD sell-offs to result from this.

If figures come out higher this will be one of the final hurdles for the Fed to look back at and consider hiking rates, if this NFP beats expectations I think the likelihood of an imminent rate hike is very feasible.

The second component is average hourly earnings this is important as it highlights the quality of that employment data, it’s no good creating hundreds of thousands of jobs if they are all really low quality low paying jobs – we need peoples earnings to be going up as well.

Last time it was expected to come out at 0.3% and it came out as 0.5% absolutely smashing expectations, this time we are expecting 0.2% if we get a similar upside surprise on expectations this could send the USD soaring.

What we want to be looking for is a combination of NFP, unemployment rate and average hourly earnings where I would go as far to say that average hourly earnings (despite how it is marked on the calendar) is probably the most important, if we get a combination of positive figures on these three data points we could see some real strength on the USD.

If positive you can obviously trade out of the release don’t be too concerned if you feel you’ve missed the move as there are still pips to be made as long as you get in before the close of the first 5 minute candle looking at positions against the weaker currencies EUR, JPY and to a lesser extent CAD, AUD.

Technicals:

Remember to be aware of intra-day news as this can very often change the sentiment which makes the USD weaker.

Other Market Moving News:

Also on today’s calendar we have SNB Foreign Currency Reserves (8am), Canadian Building Permits and Trade Balance (1:30pm)

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