In the European morning as we approach Non-farm Payrolls, traders will tend to be very cautious and this is exactly what we have seen today. Forex traders are sitting on their hands with Euro/Dollar and Cable both trading in 30 pip ranges, with Dollar/Yen also sideways. Furthermore the European indices have also flat-lined after the early moves higher.
Today’s Non-farm Payrolls are important for the major reason that we will begin to find out whether the economy is bouncing back as the weather improves following the winter bleak weather related lull in the US recovery. At some stage in the coming months there is likely to be a big number for Non-farms although today might be a bit soon. The recent improvement in weekly jobless claims (not including yesterday’s number) and the stronger ADP employment suggests that today’s payrolls could be upwards of 200,000.
A strong payrolls number would be Dollar positive and equities positive. This would therefore continue the recovery we have seen in the past few days where EUR/USD and GBP/USD have both fallen away and USD/JPY has pushed to 104. Both the DAX and FTSE 100 have been pushing higher for several days and are trending nicely higher. Expect this to continue with a number of around 200,000 or higher.
How gold reacts will also be interesting. The two week sell-off has shown signs of finding support in the past few days with trades seemingly happy to buy around $1280. A strong payrolls number could cause a knee-jerk reaction lower, but if the support at $1277.29 remains intact then this could represent a strength of support not seen for the past couple of weeks. If the recovery then starts to resume then this could be taken as a near term buy signal.
Oh and don’t forget, watch the spike!