US job data likely to incite high volatility in the financial markets

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US job data likely to incite high volatility in financial markets

On Friday, the US labor department is going to release the non-farm Payrolls and the unemployment rate figures for the previous month. Both the reports are believed a key indicator for assessing the situation in the US labor market. Generally speaking, a high non-farm payrolls reading while a low unemployment rate figure are considered good for the economy. Stocks to bonds and currencies to commodities, almost every financial market faces the consequences of the US job data.

Expectations

According to the forecast of different economists, surveyed by Bloomberg, the non-farm payrolls increased to 150,000 in February as compared to 113,000 in the month before. The unemployment rate, however, remained steady at 6.6% during the course of the previous month as compared to the same unemployment rate in the month before, the forecast added.

A few other economic reports are also due on the same day, those include US trade balance for January and US average hourly earnings for the month of February. The market is expecting an increase in the trade deficit to $38.8 billion in January as compared to $38.7 billion deficit recorded in the month before. Similarly, average hourly earnings in the US dropped to 2.0% in February as compared to 1.9% in the same duration of the year before.

Trade Ideas

After the US job data, the highest level of volatility is often observed in the six major currency pairs which are USD/CHF, USD/JPY, EUR/USD, GBP/USD, AUD/USD, and USD/CAD. US Dollar (USD) rallies after the better than expected job reports and vice versa. Since commodities have a negative correlation with the Dollar, so they move in the opposite direction of the greenback following the labor market releases. Following are some trade ideas for Friday;

For better than expected job reports:

1)      Sell Pound / Dollar (GBP/USD) around 1.6750, the stop should be placed at 1.6850 and the target may be 6550

2)      Sell Euro / Dollar (EUR/USD) near 1.3790-1.3810, the stop must be place around 1.3900 and the target can be 1.3650

For worse than expected job reports

1)      Sell Dollar / Yen (USD/JPY) around 103.00, the stop may be placed near 103.50 and the target should be 101.00

2)      Buy gold near $1335 an ounce, the stop should be near $1325 and the target may be $1372

The trade ideas are based on the weekly support and resistance levels and the overall bias for different pairs. Avoid the abovementioned trades if the job reports come in line with the expectations or mixed.

Conclusion

Significance of the February job data is comparatively higher because the Federal Reserve is due to announce the FOMC decision on the pace of the monthly asset purchase program on March 19. The FOMC policymakers will analyze thoroughly the outcomes of February job data before announcing another cut in the stimulus. 

To contact the writer of this story: Usman Ahmed at usman@forexminute.com