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Planning on trading the NFP this week?

Here’s what you need to know about the previous report, how the dollar reacted, and what’s expected this time.

What happened before?

  • April NFP at 266K vs. 960K consensus
  • April jobless rate rose from 6.0% to 6.1%
  • Average hourly earnings at 0.7% vs. projected flat reading

After back-to-back impressive NFP readings, the April U.S. jobs report turned out to be a HUGE disappointment.

Analysts had expected to see nearly a million jobs gained for the month, but the headline reading printed a measly 266K increase.

So much for that positive momentum everyone was counting on!

Instead of improving from 6.0% to the projected 5.8% figure, the unemployment rate ticked up a notch to 6.1%.

On a less downbeat note, average hourly earnings rose by 0.7% after the previous 0.1% dip and the expected flat reading.

That didn’t stop dollar bears from coming out in full force, though!

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

The Greenback tumbled across the board upon seeing the downbeat jobs numbers, which likely cast doubts on the Fed’s tapering plans.

After a brief pullback, the selloff carried on for most USD pairs over the next few bars, before most majors consolidated for the rest of the session.

What’s expected this time?

  • May NFP expected to come in at 645K
  • Unemployment rate to improve from 6.1% to 5.9%
  • Average hourly earnings to show 0.2% uptick

It looks like market watchers are still hoping for a decent pickup in hiring, forecasting a 645K increase in employment for May.

This should be enough to bring the unemployment rate back down to 5.9% for the month.

Wage growth could slow down, as the average hourly earnings figure is slated to show a 0.2% uptick after the earlier 0.7% gain.

As of this writing, leading indicators are looking mixed.

Even though the ISM manufacturing PMI for May beat expectations, the jobs component, however, fell from 55.1 to 50.9 to reflect a slower pace of hiring gains in the industry.

On a positive note, weekly jobless claims throughout the month have been falling steadily, so the monthly jobs figure might not be so bad.

Still, another NFP miss might put more downside pressure on the U.S. dollar since this would likely push back the Fed’s timeline to scale back stimulus.

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.