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Non-Farm Employment Report – Expected Scenarios

6 Oct 2017 01:59 PM

Below is a look at the most important data that may have a direct or indirect impact on the readings to be released today:

  • The ISM manufacturing index posted its best reading in nearly 13 1/2 years in September, while the employment component recorded its highest level since 2011. (Positive)
  • The ISM Non-Manufacturing Index recorded its best reading since August 2005, with non-manufacturing activity recording a growth of 93 consecutive months, while the employment component of the sector grew for the 43rd month in a row. (positive)
  • The private sector employment index added 135,000 jobs in September, the 11th consecutive month that adds jobs above the 100,000 level. (positive)
  • The number of applicants for unemployment benefits dropped to 260,000 during the last week of September, with claims returning to normal levels following Hurricane Irma and Harvey. Claims remain generally low, indicating the Job security of Americans. (positive)

Expected scenarios:

Scenario 1

The reading of the NFP to come within the range of expectations near the levels of 100K jobs in September, with stable unemployment rates and improved rates of wages,

  • This will support the US dollar to continue its rising recently,
  • the EURUSD is expected to see a decline to the level of support at 1.16,
  • we would see gold tends to fall to the level of support at 1254$.
  • The USDJPY may rise above the current resistance level at 113 to reach 113.75.

Scenario 2

The index to add better reading than the current expectations and exceeding the levels of 150K or reaching the levels of 200K, in addition to improving rates of wages and stability of unemployment rates at current levels or falling more.

  • Dollar will be strongly supported and push it to rise in front of rivals,
  • The EURUSD is expected to fall to support levels at 1.16 / 1.1560 and may be heading further to visit the 1.15 / 1.1480 levels.
  • Gold will fall sharply to levels of 1237$. USDJPY would move up to the 114.50 level at the upper line of the ascending channel.

Scenario 3

It is the most pessimistic scenario that the September reading to come below expectations or below 50,000 levels.

  • This scenario will be more negative for the US dollar and will push it down significantly against its rivals,
  • EURUSD could rise above the 1.1770 level to reach 1.1860 again, which represents the broken neckline of the head and shoulders pattern.
  • Gold prices to rise reaching levels of 1280/1290 dollars per ounce.
  • USDJPY may be retreating significantly to the support level at 112.25 and could extend to levels of 111.30.

Equiti Research Expectations:

We are more inclined to the second scenario, which suggests that the economy will add jobs within the range of expectations near the 100,000 jobs, and unemployment rate will stabilize at 16-year lows of 4.4% and average hourly earnings to 0.3%. and it would maintain US dollar rising over the recent period, especially following the growing expectations of the Federal Reserve to raise rates in December in light of the continued provision of the economy to the positive data.

Here are some of the products that will have a direct impact:

 EURUSD

Gold

USDJPY

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