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Tomorrow at 1:30 pm GMT we will see Uncle Sam’s non-farm payrolls (NFP) numbers for the first month of 2021.

What do you think are markets expecting? More importantly, how will the report affect the dollar’s intraweek trends?

Here are major points you need to know if you’re planning on trading the release!

Last month’s price reaction was all over the place

And the NFP barely factored in!

I mean, sure, the dollar made new intraday lows when the headline NFP came in waaaaay worse than expected.

But the safe-haven also recovered all of its intraday losses when traders started worrying about Democratic Senator Joe Manchin throwing a monkey wrench into Biden’s stimulus plans.

It wasn’t until Manchin steered his “absolutely not” statement away from our stimmy checks when risk appetite dragged the Greenback closer to its pre-NFP levels.

Overlay of USD Charts: 15-Min
Overlay of USD Charts: 15-Min

Here are the numbers from last month’s report if you’re interested:

  • December NFP surprises at -140K vs. +50K expected
  • December unemployment rate steady at 6.7%
  • December average hourly earnings jumps from 0.3% to 0.8%
  • November NFP revised higher from 245K to 336K

Expectations for January’s labor data are mixed af

  • January headline NFP seen improving from -140K to +45K
  • January unemployment rate could remain at 6.7%
  • January average hourly earnings to slow down from 0.8% to 0.3%

As you can see, markets expect net job additions in January, but hourly earnings could only rise by 0.3% while the unemployment rate could stay at 6.7%. What’s up with that?!

Leading indicators are a bit more optimistic

ISM’s manufacturing PMI cheered the third consecutive month of improved employment numbers, saying that they reflect both rising capacity requirements and upbeat prospects for the year.

Ditto for the ISM’s services PMI, which noted that the strong new orders, low inventories, and expanding backlog point to employment strength “for the rest of the first quarter.”

Yesterday’s ADP report also showed broad gains in hiring, printing 174K job additions in January after seeing a revised 78K drop in December.

Meanwhile, Markit’s services PMI alerted a softer rise in employment at service providers though it also noted a quicker increase in job creations for manufacturers.

Last but not least is the weekly initial jobless release. Recall that the four-week average had jumped from 740,500 to 837,500 from November to December, which led to the NFP contracting for the first time since April.

If today’s initial and continuing claims show small declines as analysts are expecting, then we could see only marginal increases in the jobless claims’ four-week averages.

So, how can you trade the release?

Thanks to the easing of December’s lockdown measures; some start-of-year business planning, and stimulus and vaccine-related optimism, we will likely see job creation for the month of January.

Before you buy the dollar like there’s no tomorrow, though, you gotta note that the Greenback has already been gaining pips against its counterparts for most of the week.

And then there are other market themes and countercurrency catalysts *cough* Canada’s jobs data *cough* that can steer the dollar’s price action after the NFP release.

So, unless we see significant hits or misses, or if there are no bigger themes moving the markets, then the dollar’s post-NFP reaction will likely be strong but quick. That means you have to be ready to book them profits (or cut losses) as soon as you can!