Are payrolls good or bad for risk?

This is the question of the session, so far. Thursday was all about the ECB and the BOE, now it’s the US’s turn to shake some market feathers with US non-farm payrolls. This is a crucial number since the Fed has explicitly tied the timing of the end of QE3 to the labour market. The market expects a 165k increase in payrolls, FOREX.com’s proprietary model is predicting an above-consensus reading of 196k; the unemployment rate is expected fall to 7.5% from 7.6%.

The trouble with payrolls is that it’s always bit of a stab in the dark and subject to large revisions. The summer numbers can be particularly hard to read because of scheduled factory shutdowns during quiet periods and public holidays. This increases uncertainty and market nervousness, so expect fireworks later today.

Some FOREX.com clients have been particularly perplexed by whether or not a strong number is good for risky assets or not. After all, a strong payroll number increases the chance of a tapering in the next few months, which could weigh on global stock markets and push the dollar higher. In contrast, a weak number may have the opposite effect. A number roughly in line with expectations could see the most muted reaction in the markets.

Payrolls can have a bearing on most asset classes, but the most sensitive tend to be: US Treasuries, UISDJPY and stocks. In the lead up to the report (released at 1330 BST/ 0830 ET) USDJPY is coming under some downward pressure. There are a couple of reasons for this:

• Key technical resistance comes in at 101.20 in USDJPY, the top of the daily Ichimoku cloud, which has thwarted the upside in the last few sessions. The high this week has been 100.85, suggesting that there is some selling pressure ahead of this level.

• Short-dated Treasury yields are lower today, even though longer-dated Treasury yields like the 5-year and the 10-year are higher, which may also be weighing on this cross as USDJPY is sensitive to changes in short term yields.

• A strong payrolls figure could boost 2-year yields, which could help USDJPY break above the cloud for the first time in a month, which would be a bullish development and the start of a technical uptrend that opens the way to 102.50 and then 103.70 – the highs from May.

• If we get a weak payrolls number expect even more downside pressure in USDJPY. Key support lies at 99.25 – the 50-day moving average, which has capped the downside this week. Below here opens the way to 98.90- the Tenkan line on the daily cloud.

Источник: Forex.com

05.07.2013