The Fundamental Giant of The Week : August's NFP
One of the biggest market movers is being released this week, Non-Farm Payrolls. Economists are projecting August’s figure to come at 159K (vs 164K in July).
The summertime has finally ended and the big players are back to the trading floors. Liquidity may arise significantly before and during Friday, which may cause many USD pairs to move sharply if the result is far from the expected. The S&P and the DXY have recovered some losses last week. S&P is currently trading at 2926 and the DXY is again reaching previous highs. The Dollar Index, however, is at a key resistance level and any surprises can trigger the sell buttons.
NFP, as many of you know, is released the first Friday of every month and it covers key information about the labour market. Employment data is key to analyse the performance of inflation and economic growth, that's why this report published by the Bureau of Labor Statistics is a must for every FX trader. If NFP comes significantly below 164K, investors will take the number as a sign of economic contraction. On the opposite, if the report comes better than expected (above last month’s results) then the Dollar may certainly experience a new wave of buyers. With holidays coming to an end, volatility is back in the territory and many traders are expecting shocking movements on Friday. With many economists expecting the “Grand-daddy of the fundamentals” to come lower than July’s figures, the dollar can lose ground in major pairs such as the EUR/USD (which is already significantly oversold), the USD/JPY, GBP/USD and USD/CHF.
Also, the most clever traders are also going to be monitoring ADP on Wednesday. This data is considered as the “peak of the iceberg” in the labour market, as it expresses an estimated change in the number of employed people, excluding the employees of the farming industry and the government. One scenario that needs to be kept in mind is that is the NFP comes neutral (around 164K), then you should open the report and quickly check the average hourly earnings and it also gives information about the market.
BONUS TIP: Investors usually see this little figure when the NFP shows no clue of the future direction of the economy....