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Market Insights

The Skilling NFP Preview - January 2023

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US hourly earnings hold the key for US dollar direction

  • Event: United States Non Farm Payrolls
  • Released: Monthly on the first Friday
  • Next release: 1:30 GMT January 06, 2023

Why this report matters: includes surveys from around 144,000 businesses and government agencies, provides detailed information on the US employment situation as well as the number of hours employees worked during the previous month and the earnings of workers on nonfarm payrolls. This data includes around one-third of all US nonfarm jobs and is a key indicator of measuring the strength or weakness of the US economy.

  • Asset focus: US dollar and related assets

Skilling point of view:

Flat US Job growth

Month-on-month US Nonfarm Payrolls have been slowing since February 2022 and now, US job growth has been relatively flat during the previous quarter.

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Real US Average Hourly Earnings have increased

While new job creation has slowed, the average hourly earnings reported for November 2022 indicated the strongest increase in 10 months.

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USD at risk?

Although the US dollar index has increased around 6% against most other developed currencies during the last 52 weeks, the US dollar could be in danger of weakening sharply against the major FX pairs on Friday, if the NFP report indicates that US Real Average Hourly Earnings fall below market consensus expectations.

US real wages have been a key driver of higher inflation during 2022, so any signs that wages are backing off could place the USD under downside risk.

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NFP market expectations for Friday, January 06, 2023

Forecasters are calling for at least 200,000 to 220,000 new jobs created during December, while the unemployment rate will remain steady at 3.7%. The key potential high impact event driver could be if the average hourly earnings comes in above or below forecast.

Higher average earnings could support the Fed to keep interest rates higher for longer, while if average earnings fall below forecast then that could indicate early signs of slowing wage growth, which could even support a case for the Fed to make a policy shift for rate cuts sometime during 2023.

Indicator Previous Forecast Units
Nonfarm Payrolls 263 200 k
Private Payrolls 221 167 k
Unemployment Rate 3.7 3.7 %
Average Hourly Earnings 0.6 0.4 %
Average Workweek 34.4 34.4 hrs

USD scenarios on NFP day

  1. Provided the headline nonfarm payroll growth remains relatively flat and falls between consensus 200,000 to 220,000 range, and average annual earnings also fall within the 0.6% to 0.5% consensus view, the USD could see some short term price support.
  2. If the headline NFP number is above or below the consensus but within the 260K-200K range and the average hourly earnings comes in hot, i.e. above forecast, then the USD should see an increase in price support and strengthen against the majors in the short term (1 to 25 days).
  3. Either way the headline NFP hits or misses the consensus, but hourly earnings fall, then the USD could see a sharp and fast sell-off against the majors.

Technical Commentary

Gold: Technical conditions remain bullish

Weekly Chart: The current trend remains bullish; multi-week higher tops and higher bottoms on price supports the case for the dow pattern uptrend (daily chart); both the 4 week and 13 week rate of change oscillators above zero (bullish); RSI is above 50 reading on both the daily and weekly chart (bullish), therefore long positions can be technically supported provided price remains above the $1,730 key support for prospective upside move towards the $1,842 (short term resistance) and $1,915 area in extension.

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Support/Resistance Levels Price Key Turning Points
1,915.20 61.8% Retracement from the 52 Week Low
1,861.20 50% Retracement From 52 Week High/Low
Pivot Point 3rd Level Resistance 1,845.10
Pivot Point 2nd Level Resistance 1,838.70
Pivot Point 1st Resistance Point 1,832.50
Last 1,826.20 Last (January 2, 2023)
1,826.10 Pivot Point
Pivot Point 1st Support Point 1,819.90
1,817.50 38.2% Retracement From 4 Week High
Pivot Point 2nd Support Point 1,813.50
1,810.00 50% Retracement From 4 Week High/Low
Pivot Point 3rd Support Point 1,807.30
1,807.20 38.2% Retracement From 52 Week Low
1,802.50 38.2% Retracement From 4 Week Low
1,761.80 38.2% Retracement From 13 Week High
1,737.10 50% Retracement From 13 Week High/Low
1,712.40 38.2% Retracement From 13 Week Low

EUR / USD: higher tops and higher bottoms on price indicates uptrend

Weekly Chart: Despite the multi-month uptrend, current price seems to be consolidating the recent October - December price advance; any pullbacks on price in the short term (5-25 days) could be viewed as “corrective” and provided price can remain above the key support around the 1.04625 area, then the uptrend could remain intact for further price push higher towards the 1.0746 - 1.079s.

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Support/Resistance Levels Price Key Turning Points
Pivot Point 3rd Level Resistance 1.08061
Pivot Point 2nd Level Resistance 1.07597
1.07465 61.8% Retracement from the 52 Week Low
Last 1.06669 Last (January 02, 2023)
Pivot Point 1st Support Point 1.06571
1.06235 38.2% Retracement From 4 Week High
Pivot Point 2nd Support Point 1.06107
1.05891 50% Retracement From 4 Week High/Low
Pivot Point 3rd Support Point 1.05826
1.05547 38.2% Retracement From 4 Week Low
1.05155 50% Retracement From 52 Week High/Low
1.03139 38.2% Retracement From 13 Week High
1.02844 38.2% Retracement From 52 Week Low
1.01838 50% Retracement From 13 Week High/Low
1.00537 38.2% Retracement From 13 Week Low

Not investment advice. Past performance does not guarantee or predict future performance.

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