In the upcoming US session, the attention shifts to the US jobs report. Let’s explore the expectations, possible scenarios, and how it could impact the markets.

Indicator Forecast* Prior
Two-Month Payroll Net Revision — 126K
Change in Non-Farm Payrolls 200K 353K
Change in Private Payrolls 165K 317K
Change in Manufacturing Payrolls 7K 23K
Unemployment Rate 3.7% 3.7%
Average Hourly Earnings MoM 0.2% 0.6%
Average Hourly Earnings YoY 4.3% 4.5%
Average Weekly Hours All Employees 34.3 34.1
Labor Force Participation Rate 62.6% 62.5%
Unemployment Rate U-6 — 7.2%

*According to Bloomberg

Most economic calendars online usually only show three figures: Non-Farm Payrolls, Unemployment Rate, and Average Hourly Earnings MoM. However, the report contains much more data that traders should not overlook. This additional data can explain why the market is reacting differently from expectations. By paying attention to all the data, traders can better understand the market impact and make more informed decisions.

What matters the most today?

Traders should pay attention to three things today. Firstly, the overall report, which includes all datasets. Secondly, the revisions of the previous report, especially after it came in with a much bigger surprise than all the expectations according to the Bloomberg survey back then. Thirdly, the YoY Average Hourly Earnings are what matters for policymakers to assess the wages and whether there is potential inflation.

Possible scenarios and market impact

-A positive report refers to a dataset that shows better-than-expected outcomes, including a higher number of new jobs, a lower unemployment rate, and surprise increases in wages. If this happens, the US Dollar is likely to rebound. This scenario would reduce the likelihood that the Federal Reserve will cut rates hastily, and it would decrease the probability of a rate cut in June.

– A negative report indicates a disappointing dataset, featuring a lower-than-anticipated job creation, a higher unemployment rate, and a significant decrease in wage growth. If this happens, the US dollar is likely to decline further, while US equities are likely to welcome the outcome as easing monetary policy would lower borrowing costs.

– When analyzing data that presents mixed outcomes without a clear overall report, traders should focus on wage growth. It’s essential to look at the month-on-month (MoM) and year-on-year (YoY) wage growth. If wage growth is slower, June’s rate cut may still be on the table. Conversely, a surprise increase in wage growth would reduce the probability of a rate cut in June.

DXY hits all targets

The US Dollar index hit our previously mentioned targets, including 103.30 and 103.0, and continued to decline yesterday, reaching as low as 102.73 this morning.

In the meantime, the time/price method has confirmed the resumption of the downside trend about two weeks ago. The move observed yesterday could be the initial move only, particularly after closing below multiple support levels.

The next area of support is at 102.60. If this level is broken, it may lead to further declines towards 101.96. On the upside view, any upside retracement is likely to remain capped below 103.60 and/or 104.00. Our bearish outlook remains unchanged as long as the index continues to trade below those levels.

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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