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Looking for a big event to trade this week?

Well, you’re in luck because the NFP is coming right up!

What happened before?

  • Hiring in April rose by 428K vs. the expected 390K gain
  • Unemployment rate was unchanged at 3.6%
  • Average hourly earnings posted 0.3% uptick vs. projected 0.5% increase
  • March NFP figure downgraded from 431K to 428K

Uncle Sam posted an upside surprise for its April NFP report, reflecting an increase in employment of 428K versus the projected 390K gain.

Not all was as bright and sunny as the headline figures suggest, though, as the hiring pickup wasn’t enough to bring the jobless rate down to the expected 3.5% figure. Also, wage growth was feeble, with the average hourly earnings figure rising by a meager 0.3% instead of the estimated 0.5% gain.

In addition, the previous month’s figure was downgraded from a 431K increase to just 428K. Labor force participation also took a hit, falling from 62.4% to 62.2% and reflecting how businesses struggled to find workers.

USD Forex Pairs 15-min Charts

USD Forex Pairs 15-min Charts

With that, it’s no surprise that dollar pairs barely budged from the April NFP report. Although the Greenback initially popped higher upon seeing upbeat headline figures, it quickly returned those gains and moved mostly sideways for the rest of the session.

What’s expected this time?

  • May NFP to come in at 325K
  • Jobless rate to dip from 3.6% to 3.5%
  • Average hourly earnings to advance by 0.4%

Market watchers are hoping to see an increase of 325K in hiring for the previous month, slower than the gains reported over the past four months. Still, this should be enough to bring the unemployment rate down from 3.6% to 3.5%.

Tighter hiring conditions also likely drove wages slightly higher for the month, leading to a 0.4% uptick in average hourly earnings.

Leading indicators aren’t looking so promising. The employment component of the ISM manufacturing PMI pointed to a contraction while JOLTS job openings decreased from 11.86 million to 11.4 million in April.

Many say that the recovery U.S. labor market is already starting to moderate, as the economy slowly returns to its post-pandemic pace.

Even so, a stronger than expected NFP figure would signal the labor market remains very tight which would keep upward pressure on inflation.

Expect the U.S. dollar to rally strongly since this would force the Fed to maintain a hawkish stance and negate any hopes of pausing on further interest rate hikes after the June and July FOMC meetings.

If you’re planning on trading this top-tier event, make sure you check out the average volatility of USD pairs as a guide in setting stops and targets.

But if you’re not comfortable with potential price spikes, it’s totally okay to sit on the sidelines and watch price action unfold.