U.S. Jobs Report: What To Expect For The EUR/USD
Tor Vollalokken | Mar 06, 2015 08:52AM ET
In 37 years of trading, “US Jobs Day” was always one of the highlights of the month. The graph below shows the NFP releases over the last 12 months with emphasis on the surprise element as expressed through the difference between the actual figure and what consensus forecast was.
I monitor the released figures before any revisions to preserve the surprise element in the graph. While monthly figures fluctuate, the trend line has been positive over the last 12 months with an average monthly NFP release of 233K.
When assuming something for an upcoming release I tend to focus on the ADP release two days ahead of the NFP release, the 4 week average initial jobless claims numbers and the employment components of ISM Manufacturing and ISM Non-Manufacturing. There are others as well which one could take into account but a simple way of following possible changes to NFP throughout a month is to look into the four mentioned.
Since the last NFP release I have noted that:
- ADP Employment Change was down 34 000
- The 4 week average Initial Jobless Claims number is up by 13 000
- The ISM Manufacturing Employment Component was - 0.6
- The ISM Non-Manufacturing Employment Component was – 4.4
From these four indicators one would draw the conclusion that the NFP number should be lower than last month – and possibly by more than the - 17 000 consensus forecast is today. The way I calculate this I am looking for a release more in the region of 215 000 for the month of February, down from 257 000 in January and lower than the 240 000 which is consensus estimate.
The Unemployment Rate has also shown a healthy decline – also with a surprise element – as illustrated below.
For some reason this release tends not to be so price sensitive for EURUSD upon release. It is possibly a figure more of interest to politicians than markets.
More interesting over the last months have been Average Hourly Earnings, which is a key data the Fed is focused on and a release of great interest in terms of when a rate hike could be expected by the Fed. It is also a release which has disappointed throughout the last 12 months – with last month as a noticeable exemption.
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This release could be enhancing or neutralize the impact of whatever the NFP release will show.
Average Weekly Hours and the Participation Rate tend not to influence volatility to an extent worth mentioning.
Leading up to today’s jobs reports the EURUSD has taken out the 1.1000 level but at the time of writing it doesn’t look like there is any great interest to push it a lot lower.
To account for some profit with the figure 1.09 might be tempting for some of the massive EURUSD shorts that are around these days.
The NFP week has shown on average a range of 298 pips between high and low over the last 5 years but down to 212 pips if one just take the last 12 weeks into account. While most of these weeks also is the week when the ECB has their governing council meeting, a lot of that weekly move is to be credited the ECB meeting. Still – US Jobs Day is day which has a life on its own in terms of EURUSD moves – despite falling the day after the ECB meeting.
- A NFP figure better than last month but not more than to 285 000, then I assume that 1.0940 should hold. I would think we would have to surpass 325 000 to threaten the 1.0900 level.
- A NFP release in the area of 225 – 255 000, I think we should retake 1.1050 but more serious profit taking and stop orders will likely not be in place unless the figure drops below 200 000 at what point we could retake 1.1150.
The EURUSD ECOTECHS picture so far this week:
I therefore like to use these average weekly ranges when setting assumptions for how far a surprise element could take EURUSD.
To cut the calculations short, I have set the following levels as maximum impact should we enter the release time with EURUSD around 1.1000.
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