NFP data analysis

Numbers and two scenarios

By: Ahura Chalki

Market analyst – IFC Markets

According to the June published employment numbers, employers have hired 850,000 employees in June, better than 700,000 expected. 

At the same time, Average Hourly Earnings (YoY) rose just 3.6%, more than May (1.9%), but less than 3.7% estimates, mainly because lower-income jobs are hired now as well, like in restaurants or part tie jobs in Cafes and Hotels, for summer holidays. 

On the other hand, the challenging part of the report is the unemployment rate, which, unlike 850,000 new jobs, is increased to 5.9%, from the prevouse 5.8% and more than 5.7% estimates. We have two reasons for that. The first reason is discontinuing unemployment benefits by at least ten states, which encourage more people to seek the job. And the second reason is reopenings. Reopening means more businesses are back to the active positions, so more people are hoping to find the job, and it also means more job seekers than before. Both mentioned reasons changing the ratio between the actual unemployment and job seekers, and it raises the unemployment rate, based on its calculation system. 

These numbers telling us a significant improvement in the labor market and economy; however, raising the unemployment rate is worrying. 

What can happen according to these data?

If FED focuses on the NFP number, it means that positive numbers can support the idea of over hitting the economy and less need for FEd supports; in this case, we have to wait for Hawkish comments and policies, raising the USD. On the other hand, if FOMC members focus on the unemployment rate, which is growing and worrying, holding the policy and asset purchase amount, this policy is negative for US Dollar. 

So, to understand the future market movement, we need to follow the market news and read the FOMC member’s comments on these published data. 

USD Index – Daily

In the first and immediate reaction, USD lost the ground, as 850K news jobs sent the VIX to its two weeks low, signaling of lower risk level in the market, and it means less demand for USD safe-haven. However, in the longer term, this positive sentiment must put pressure on FED to reduce the asset purchase amount and hike the rates, which means bullish for DXY. 

From the technical overview, In both H4 and Daily charts, we are moving above main MA lines, and RSI respectively is above 60 and 70, a general overview is positive. If the index can hold the position above 92.00 level, we can expect the March high above 93.44 as the next target. 

NFP data analysis


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