It’s a Kiwi holiday today down in New Zealand but this won’t stop us from prepping for the US January jobs report coming up tomorrow!
The US Non-Farm Payroll (NFP) data is scheduled to be out on Friday at 2:30 PM at the same time the Canadian Trade balance is going to be announced so lets take a moment and prep for our USD/CAD trade. Let me first start by saying that if you are not cool with trading under pressure like myself, you may want to avoid trading the news at that time and simply re-adjust your stops and limits for your longer term trades.
Let’s take a look at this from a Fundamental and Technical approach.
What’s the word on the street?
Investors and analysts are expecting to see a 236K increase in hiring for the month of January, which is a bit lower compared to December’s 252K rise. This should be enough to keep the jobless rate steady at 5.6% for now.
Early labor indicators seem to be hinting at a downside surprise, as the ADP non-farm employment change reading fell short of expectations and printed a mere 213K gain. The labor component of the ISM manufacturing PMI edged down from 56 to 54.1 while the non-manufacturing survey showed a decline from 55.7 to 51.6 in its employment index, also suggesting that hiring may have slowed down in January.
Here is a chart from Estimize showing the expectations vs. actual numbers of NFP in the past two years:
The December report posted stronger than expected results, with the employment change figure coming in at 252K versus the projected 241K figure and the jobless rate improving from 5.8% to 5.6%.
But if you look at it closely,you’ll notice that labor force participation declined significantly during the period. This means that more Americans have exited the jobs market and given up looking for work. Wage growth was also weak, as average earnings indicated a 0.2% decline for the month.
What does technical analysis tell us?
On the negative anticipation, the pair has been rebounding towards our previous bullish target and resistance now turned into new support at 1.24.
The long-term bet has been whether or not Ms. USA would get strong enough to reach the 6 year high at 1.30 but with the oil prices expecting to be back up as well as NFP’s new predictions, the pair is now facing a rebound.
Since the 23% Fibonacci level at 1.2286 falls perfectly on the Bollinger’s middle band, we could expect the market to fall to this level at the minimum. However, with the pair still way above the Ichimoku cloud, only a break below 50% Fibonacci level at 1.17 would change our long-term outlook to bearish, in which case our targets will be 1.1461 and 1.1134 in extension.
Do you think the NFP report will post another strong reading?
