On Friday we will get the non-farm payroll report for the month of October. Traders will anticipate this report as it will not only give an insight on the labor market, but could also provide more clarity about quantitative easing by the US Federal Reserve. Equity markets have reacted in a positive fashion on the back of bearish economic news as the majority wants the Fed to continue its current policy without tapering.
Expectations for the Friday’s NFP report call for an increase in jobs by 125,000 while the unemployment rate is supposed to increase by 0.1% to 7.3%. Any surprise will move financial markets with forex markets bound to experience the biggest increase in volatility. Look out for the US Dollar to move violently in either direction which would depend on the actual headline figure.
Traders should be especially careful with revisions to the previous two months which are very common. The revisions give a much better snapshot than just the reported headline. It is important to add or subtract the revisions to the current headline figure in order to get a more complete picture of the labor market in the US.
Forex traders are advised to head into the release on Friday with extreme caution as the headline figure could disappoint and come in closer to 100,000 which would be a terrible report on the state of the labor market. Given that the US government endured its first shutdown, a partial shutdown which lasted from October 1st and ended on October 16th, in 17 years has also dampened the economic outlook on the US for the fourth-quarter of 2013 and beyond.
Should the NFP report show headline gains less than 100,000 forex traders should expect a sharp sell-off in the US Dollar as well as global equity markets as the data would be bad for those cheering for stagnant data just to keep the Fed in play. It is a rather dangerous cheer and extreme caution is advised.
Those who enter the report with open positions and tight stop loss orders are likely to get stopped out so it is suggested to revise existing positions and ensure that either outcome is accounted for and order set accordingly.