NFP preview: will the US NFP figure outperform again?
With Friday’s US jobs report wrapping up the 2019 data, will we see another blockbuster payrolls figure?
Can the November NFP number be replicated?
Market are gearing up for a new year, yet this week will bring a nod to the year gone. Friday’s US jobs report seeks to round off a 2019 that saw non-farm payrolls (NFP) number building towards the end of the year. Coming just behind the January 2019 reading of 304k, last month’s November release provided us with the second highest reading of the year, at 266k.
The size of that monthly rise does provide some with confidence of a potential rise in the dollar, yet market expectations instead signal a likely decline to around 168k for the headline number in December. Part of that story comes from the fact that last month’s gains were exaggerated by the return of approximately 46,000 General Motors employees after a one-month strike.
Wage growth expected to remain elevated
Elsewhere, it is worth noting the fact that the US economy is enjoying a 50-year low of 3.5%, highlighting the difficulty employers will have in finding the right candidate for a job. With that in mind, there is plenty of reasoning behind the expectation of elevated earnings growth.
Markets expect to see a rise into the 0.3% level, following a decline into 0.2% last month. On a year-on-year basis, that average earnings figure currently stands at 3.1%, with the gap between earning and inflation highlighting a significant positive real wage growth evident in the US.
Technical analysis – dollar index
Looking at the weekly chart for the dollar index, we have seen the price decline below trendline support, with markets currently questioning whether we could be on the cusp of a bearish phase. A decline below the 95.33 level would certainly provide a bearish signal to the markets, with this recent decline looking like a potential retracement until that point.
On the daily chart, we are starting to see the pair turn higher following the recent drop below the 76.4% Fibonacci level. With price on the rise, we would need to see a break through 97.37 to negate the downtrend seen since the October peak.
From a payrolls perspective, an outperformance in the headline number could spark such a break to bring about a wider bullish picture. Alternatively, should we see a disappointing report, we should look out for another leg lower in this recent trend, with all eyes on whether the 95.33 support level is broken to bring a wider bearish picture.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets