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What We Are Watching
- Non Farm Payrolls
- Dollar/US Equity Correlation
- Gold/Dollar Correlation
It’s that time of the month again for Forex traders as Non Farm Payrolls figures will be released later today. The figure comes after yesterday’s ADP Employment Change figures blew away expectations and triggered a day long rally in the dollar. The greenback was higher across the board, even scoring nice gains against the Yen as the USDJPY has hit a high of 77.22 this morning; 65 pips above yesterday’s lows. Even more important was the dollar’s ability to gain as US Equities rallied in afternoon trading and erased initial morning weakness. The correlation revealed that the dollar’s strength may not have to be sacrificed in the wake of US based risk rallies and could be showing that Forex traders are more willing to dump the Yen and Euro to fund their speculative equity moves.
Non Farm Payrolls Preview
Expectations are for payrolls to increase 150,000 for December and the Unemployment rate to rise to 8.7% from last month’s surprise drop to 8.6%. So far this week, employment data has been on the upside with ADP and Initial Claims data beating expectations, while ISM PMI figures showed increases in the employment component of the Index. As such, Forex traders may be anticipating a continuation of upside gains in the Non Farms Payrolls today. However, with all the optimism, the markets could be set for a fall, as previous Non Farm Payrolls results have failed to beat expectations, with only the Unemployment Rate showing sharp gains. Therefore, the question has become what is really correct, the private sector surveys, Unemployment Rate, or the Government Payrolls figure?
Regardless of answer, with the current built in expectations we may need to see the headline Payroll figure beat to the upside to keep the current positive dollar sentiment going. As such, if figures miss expectations, Gold could be a big winner today as it has been gaining momentum so far in 2012 on the heels of EU worries (more on Gold). On the other hand, a strong Non Farm Payrolls figure coupled with the Unemployment Rate hold steady should keep dollar buying going, with the USDJPY being a prime candidate to trade higher throughout the day.