Forex Trading Analysis - Non Farm Payrolls Preview

What We Are Watching
Swiss Retail Sales
US Non Farm Payrolls

Its, that time of the month again with Non Farm Payrolls set be released later today.  A quick check of the week’s previous employment data showed mixed signals as we close in on the NFP result.  Tuesday’s ISM Manufacturiong figure was bolstered by solid growth in its Employment component, as well as Thursday’s Initial Claims data beating forecasts.  On the other side was Wednesday’s poor ADP Employment Change data and Thursday’s falling Service PMI figure, where the Jobs component showed slowing growth.  As such, these figures pretty much back up the premise that the US continues to experience “slow but steady” growth.  

For Forex traders, the issue is what to make of the data in regards to potential QE from the Fed.  In a speech to economists last month, Fed Chairman Ben Bernanke seemed to indicate that he favors more stimulus as the current job growth is occurring to slowly.  On the other hand, other Fed members have publicly stated that they aren’t in favor of more QE and would prefer to leave things be for the foreseeable future.  This line of thought appeared to have prevailed at last week’s FOMC meeting where there was little to indicate that the Fed was ready to act aggressively.

Coming back to today’s Non Farm Payrolls figure the question is what would it take to “seal the deal” and cause the Fed to stimulate.  Would a poor figure be enough, or will we need to see an outright stall in employment growth?  As such, in the event of a worse than expected figure, but not outwardly terrible, we could see a choppy market for the dollar take place without a clear cut direction.  A similar occurrence was seen in the Euro yesterday following the ECB’s Interest Rate meeting where Forex traders don’t see to know what to make of the central bank’s inaction.

On the other hand, if today’s NFP does meet or exceed expectations, it should be enough to quiet any of the Fed doves for at least another month.  In such a scenario the USDJPY (see Play of the Day) could see multi day upside momentum if the figures were to cause the pair to trade and close the week above 80.60 resistance.  Also, any dollar rally could put pressure on the GBPUSD which has formed at 1.6150 support base, but would be vulnerable to selling were that level to be broken.

Swiss Retail Sales

SwiftTick readers know we are into the EURCHF. As such, we feel obligated to menetion that Swiss Retail Sales figures are due out this morning.  While we don’t believe the figure will be a game changer in the EURCHF. it's worth noting that Swiss National Bank (SNB) has pointed out that weakness in exports due to a strong franc has been offset by domestic gains.  As such, a worse than expected figure today could raise the chants from Swiss businesses to raise the EURCHF price floor from its 1.2000 level.