NFP Early Insight: Initial Claims Hint At Upside Potential For NFP…And USD/JPY
Matthew Weller | Sep 01, 2021 01:26AM ET
As we work through the last of the “dog days of summer” (in the Northern Hemisphere at least), traders and portfolio managers will soon return to their desks in earnest for the busy Autumn season, and that means a renewed focus on the Federal Reserve and its policy normalization plans.
As we noted on Friday, Fed Chairman Powell struck a cautious tone at his highly-anticipated Jackson Hole speech, warning against the risks of premature policy tightening and reiterating that there was still “much ground to cover” for the US economy to reach maximum employment. Most traders viewed this speech as likely precluding a taper announcement at the central bank’s September meeting, leaving the market focused on the Fed’s November policy meeting, a full three Nonfarm Payroll (NFP) reports from now.
Nonetheless, Powell’s emphasis on the labor market and his ongoing assertions that price pressures will be “transitory” means that the monthly US jobs reports may be the most important regularly-occurring economic data for traders to watch in the coming months. We’ll have our full NFP preview report live on Thursday, but we wanted to highlight one of the key leading indicators and identify a key market to watch through the whole week as readers prepare for the key US jobs figures.
One key indicator that points to a solid print on Friday is initial unemployment claims. As the chart below shows, the 4-week moving average of new unemployed Americans has fallen to a post-pandemic low of 366k after stalling around 400k for the past two months:
Source: FRED
With (marginally) fewer Americans losing their jobs over the last month, there may be some potential for Friday’s NFP reading to beat the consensus estimate of around 750k net new jobs. We’ll have a full breakdown of what this data and other reliable leading indicators mean for NFP on Thursday.
h2 Market to watch: USD/JPY/h2We’ve noted this before, but it bears repeating: USD/JPY tends to have the cleanest and most direct reaction to the monthly jobs report (and all US data), so it bears close monitoring for anyone trading US economic releases.
Looking at the chart below, USD/JPY has spent the last eight weeks consolidating between support at 109.00 and resistance up near 110.70. As many experienced traders know, volatility tends to be cyclical, meaning that periods of constrained market movement tend to be followed by periods of rapid, higher-volatility movements when price eventually breaks out.
Get The News You Want
It remains to be seen what direction the pair will ultimately break from its well-trodden range, but an NFP-driven bullish breakout this week, if seen, could open the door for a continuation toward 18-month highs near 111.70 in short order, whereas a bearish breakdown could quickly expose the April lows near 107.50 as we head into next month.
Source: StoneX, TradingView
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.