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It’s NFP week, fellas! Think you’re ready to trade the report? Here are a few notes to remember going into the week:

NFP-related volatility

Limited bullish pressure from last week’s better-than-expected GDP report points to the bulls possibly running out of steam after a strong run.

This week we’ll see if the bears will find something in the NFP-related reports to sink their claws into.

The ADP report on Oct. 31, 12:15 pm GMT is expected to print at 190K (vs. 230K previous) and could set the expectations for the rest of the related reports.

The annualized change in Challenger job cuts will follow on Thursday at 11:30 am GMT while the weekly unemployment claims and quarterly unit labor costs will be printed on the same day at 12:30 pm GMT.

Oh, and watch out for the ISM manufacturing PMI report, as it could give clues on the labor conditions in the manufacturing sector.

And then there’s the actual NFP report. Analysts expect to see a net addition of 191,000 jobs after an addition of 134,000 in September.

Meanwhile, the unemployment rate is expected to inch higher from 3.7% to 3.8% and average hourly earnings are seen to slow down from 0.3% to 0.2%.

This week’s expectations are already weak enough, but weaker-than-expected releases could motivate the Fed to tone down their hawkish remarks.

In addition to that, downside surprises could fuel concerns over the impact of protectionist policies and the mid-term elections in the U.S. and drive traders away from the Greenback.

Overall dollar demand

An underwhelming earnings season and concerns over global growth slowdown have dragged on U.S. equities and limited demand for the Greenback.

If this week’s top and mid-tier reports point to more weaknesses for Uncle Sam, then we could see the dollar sell off against its counterparts.

But if concerns in other major economies (i.e. Brexit, German politics, trade war) overwhelm the markets, then the dollar could slip into its safe haven role and post gains across the board.

Last Week’s Price Review

The Greenback is turning in another good performance since it’s currently on track to closing out the week in third place  (as of 5:00 pm GMT), which is a repeat of last week’s performance.

And the Greenback’s bullish run this week appears to have been fueled mainly by the euro’s weakness and (to a lesser extent) the pound’s weakness, although preemptive positioning ahead of the U.S. GDP report may have also been a factor in the Greenback’s rise.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

Before we begin, let’s first strip USD/JPY and USD/CAD from the overlay since those are outliers.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

As you can see in the chart above, the Greenback had a strong start, traded sideways on Tuesday, then trended higher starting on Wednesday, before finally slumping on Friday.

There were no apparent catalysts for Greenback demand on Monday, but I conjectured in Monday’s London session recap that the pound may have been feeding off the euro and the pound’s weakness. Other market analysts also began saying the same thing later on.

In any case, the Greenback’s rally stalled when Tuesday rolled around. However, buyers would return during Wednesday’s London session.

And this time, the Greenback was clearly benefiting mainly at the euro’s expense since the Greenback began surging higher when the euro got torpedoed after a bunch of disappointing Euro Zone PMI reports were released.

More USD bulls would come out of the woodworks during Thursday’s U.S. session since the Greenback jumped higher across the board at around 1:00 pm GMT.

There were no direct catalysts for the Greenback, but it’s very likely that the Greenback was feeding off the euro’s weakness yet  again since the Greenback began moving higher when ECB Overlord Draghi dragged the euro lower during the ECB presser.

It’s also probable that the Greenback was bid higher ahead of the U.S. GDP report.

Speaking of the Q3 U.S. GDP report, that forced the Greenback to return some of its gains on Friday.

As for some deets, the GDP report revealed that U.S. economic growth slowed at a slower-than-expected pace since Q3 GDP increased by 3.5% quarter-on-quarter annualized, beating expectations for a 3.3% rate of expansion.

A quick look at the details of the report show that GDP growth was driven by the 4.0% increase in private spending (+3.8% previous) and the 12.0% surge in private investment (-0.5% previous), thanks largely to higher inventory levels.

Trade was a drag, though, since exports fell by 3.5% (+9.3% previous) while imports ramped up by 9.1% (-0.6% previous).

Despite the better-than-expected reading for U.S. GDP growth and somewhat positive details, the Greenback’s bullish reaction was only limited, which leads me to suspect that the Greenback’s rise in the run-up to the U.S. GDP report was partly fueled by preemptive positioning.

Whatever the case may be, selling pressure on the Greenback eventually began to win out, likely because the GDP price index only increased by 1.7%, which is well below expectations for a 2.2% increase and weaker compared to the previous 3.3% increase. The 1.7% reading also happens to be the weakest in five quarters.

Perhaps more importantly, the PCE price index, the Fed’s preferred measure for inflation, only increased by 1.6% in Q3, which is below the Fed’s 2.0% target and is the worst reading in four quarters to boot.

Anyhow, Friday’s slide was not enough to erase the Greenback’s gains on the majority of USD pairs, so the Greenback is on track to closing out the week as a net winner.