Things to Look Out for This Week – US Jobs Report 04/01/2021

The first week of 2021 indicates that the year might be more traditional than the tumultuous 2020. An economic calendar packed full of official announcements outlines the course of the next week. For once, market participants can prepare for news to come into the markets at pre-determined times rather than as surprise announcements.

Knowing when the news will be released doesn’t make the markets less interesting or safer, plus there are specific risks associated with the Non-Farm report’s publication.

US Jobless Data Looks Set to Dominate the Week

The US Non-Farm Payroll job numbers are due on Friday the 8th of January. Analyst forecasts are setting a pessimistic tone that has the potential to overshoot to the downside. If the numbers aren’t quite as bad as expected, there could be a short-term reversal in the eight-month slide in USD.

This would have implications for all other asset groups.

• Silver, in particular, has found strength on the back of USD weakness.
• A stronger dollar would make commodities, including oil, that are priced in USD more expensive for non-USD economies. The equity markets in Germany and Japan are particularly prone to oil price moves as both economies rely almost entirely on imports of crude.

When are the US Non-Farm Payroll Numbers Announced?

The headline number will likely lead to some whipsawing in price action. The numbers will be released at 08.30 hrs EST which equates to 13.30 hrs GMT.

Source: IG

The bottom of the trading channel in USD Basket is currently in the region of 8890. Any surprisingly good news opens the way to the higher end of the channel which is in the region of 9150

Managing risk through NFP

The NFP report is probably the most important data release of the calendar month. It will help set the tone for days and weeks of activity on the financial markets with the immediate consequences of the announcement being something to watch out for.

• Traders with a more risk-averse approach and the ability to scale back their book might take positions off until the news has been released.
• Another approach towards managing whipsaw-risk is to take stop-losses off and monitor the market moves manually. While this does little to address the overall risk, it can avoid trades being closed out due to the volatile price moves that occur in the seconds after the news is released.
• The Euro-dollar forex market might be an interesting one to follow this week. Being one of the most liquid markets globally, it’s easy for traders to get into and out of without incurring the costs associated with wide bid-offer spreads.

EURUSD set to continue upwards?

EURUSD has for eight months been a happy hunting ground for those betting against USD as the weekly price chart provided by BDSwiss shows.

Source: BDSwiss

With price currently trading mid-channel, there is potential for the dollar to strengthen on the back of Friday’s NFP numbers being better than expected. There are still several trading sessions to go before the announcement, so it will be interesting to track the EURUSD price to see if investors begin taking positions in advance.

Nigel Frith

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