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Looking for a big market event to trade this week? The upcoming NFP release could be a good chance to catch some pips off dollar pairs!

What happened last time?

  • October employment up by 128K vs. 90K consensus
  • October unemployment rate up from 3.5% to 3.6% as expected
  • October average hourly earnings up by 0.2% vs. 0.3% forecast
  • September NFP reading upgraded from 136K to 180K

Unlike the previous releases, the October NFP report came in better than expected with a 128K increase in hiring versus the projected 90K gain. To top it off, the September reading enjoyed quite the upgrade from 136K to 180K.

However, the October jobless rate ticked higher from 3.5% to 3.6% as expected while wage growth came short with a meager 0.2% uptick.

Overlay of USD Pairs: 15-min Forex Charts
Overlay of USD Pairs: 15-min Forex Charts

The Greenback popped up after seeing the headline figures but faded the move as traders got wind of downbeat underlying data.

What are traders expecting this time?

  • November NFP figure to come in at 186K vs. 128K forecast
  • November jobless rate to hold steady at 3.6%
  • November average hourly earnings to increase by 0.3%

Analysts expect a pickup in employment for November as the NFP reading is projected to show a 186K gain and wages probably picked up by 0.3% for the month. This should be enough to keep the unemployment rate steady at 3.6%.

What are leading reports suggesting?

It ain’t lookin’ so pretty. The ISM manufacturing PMI has fallen below expectations for the fifth month in a row last November, and the jobs component tumbled from 47.7 to 46.6 to reflect a deeper contraction.

The non-manufacturing version of the report also came in the red for November, falling from 54.7 to 53.9 to signal a slower pace of industry expansion. Its jobs component managed to tick up from 53.7 to 55.5, though, so hiring was stronger in this sector.

However, the ADP non-farm employment change also missed the mark as it came in at 67K, roughly half of the projected 137K reading and way below the earlier 121K increase.

How might the dollar react?

The Greenback is mostly oversold against its counterparts at the moment, based on stochastic:

USD Pairs Stochastic from MarketMilk
USD Pairs Stochastic from MarketMilk

If the actual results come in much weaker than projected, then the dollar could take another round of hits across the board as disappointing jobs figures could make the Fed “materially reassess” their outlook.

On the other hand, if the numbers show a significant upside surprise, the dollar could recoup some of its losses from earlier this week as markets downplay the odds of more rate cuts soon.