Jobs Number to Offer Opportunities on Friday

Alan Penny

9 January 2020

3 min read

At 8:30am New York time tomorrow, the world will receive the Non-Farm Employment Change figures coming from the Bureau of Labor Statistics in the United States.

This is one of the most important figures that traders focus on each month. It gives us an idea as to what the employment situation in the United States is, and therefore how the consumer could act, with the latter being one of the main drivers of economic activity in the world.

Potential trades

USD/CAD divergence

Around the same time that the United States will release the Non-Farm Employment Change figures, the Canadians will release the Employment Change figures. Because of this, traders will quite often use a divergence of the numbers in order to place a currency trade in the USD/CAD pair.

The idea is to trade in the direction of an upward surprise

For example, the Americans are expected to produce a figure of 162,000 jobs added for the month of December. At the same time, the Canadians are expected to show 24,900 added in that same month. The idea is to trade in the direction of an upward surprise. If the United States produces a number that is higher than expected, for instance, while the Canadians come in short, the trade is to buy the USD/CAD pair. Alternately, if the situation is reversed, then the trader will short the USD/CAD pair.

Going for gold

Focusing again on the jobs figure, it’s very likely that if the United States comes in at much less than the 162,000 added, people will start to look at the Federal Reserve through the microscope of potential monetary policy, and more specifically the idea that the Federal Reserve will loosen monetary policy.

Having said that, if the number comes in below 150,000 jobs added, gold could rise. That’s because not only will the US dollar fall a bit, but people will start to speculate that the Federal Reserve is getting closer to loosening monetary policy, which naturally helps gold. Ultimately, if the market was to add over 200,000 jobs, it would probably send gold much lower.

Crude oil trade

Crude oil also gets a boost from the jobs number at times, with the idea that the stronger the employment market is, the more likely it is that people will use more petroleum.

They buy more things, so transportation will pick up for shippers and trucking corporations. Furthermore, those who are employed will very probably drive more, and therefore drive up demand for crude oil.

On a stronger-than-anticipated jobs report, you may see the US dollar strengthen, which will initially drive down the value of crude oil. But once the dust settles, it’s highly likely that crude oil will turn right back around and go to the upside.

Otherwise, if the jobs number comes in below 100,000, the crude oil market will probably initially rally due to a soft US dollar. Then, the reality of demand coming in even lower will probably settle in, and crude oil will drop right back down.

Take your time

One thing that traders should keep in mind on these Non-Farm Payroll sessions is that they should take their time. In other words, they are recommended not to jump into the market immediately, but to make sure that the market agrees with any of the analysis mentioned.

Traders should keep position size relatively small, and if the trade starts to work out in their favor, then they can start to add. It is possible to trade the Non-Farm Payroll announcement, but not in the immediate way that so many retail traders fail at.

Written By
Alan Penny

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