Developments in the US labor market and the broader US economy is one of the key data points which the U.S Federal Reserve considers in it's decision to either hold, cut or raise interest rates.
For example, a buoyant labor market is associate with a strong economy, which has the ability to place upward pressure on inflation and in turn, requires higher interest rates. This economic scenario is a positive for those looking for a higher US Dollar which will benefit from higher interest rates and possibly higher interest rate differentials.
Conversely, a weak labor market is associate with a slowing economy, which has the ability to place downward pressure on inflation and in turn, leaves room for the lower interest rates. This economic scenario is a positive for those looking for a lower US Dollar which becomes a casualty of lower interest rates and possibly lower interest rate differentials. For example, versus the European Union.
The data point, U.S Non-farm Payrolls will be released at 2:30pm today. It is highly anticipated and is closely monitored by market participants from every corner of the globe. The reaction to the release creates volatility around selected instruments, however this also creates opportunities to trade and potentially derive at a profit.
Today, the consensus is for the U.S. economy to have added 185,000 jobs for the month of May. Missing these expectations is likely to place pressure on the USD while print above this figure could support buying activity in the USD.
Among others, here are three instruments by which traders can participant in and potentially profit from as the market positions and reacts to the release.
Shown, are the 30-minute charts, with key support and resistance levels.
1. FX: EUR/USD
2. Spot Gold XAUUSD
3. FX: USD/ZAR
To trade, or open a new account, contact the Unum Capital Trading Desk:
E-Mail: tradingdesk@unum.co.za | Call: 011 384 2923
Lester Davids
Analyst: Unum Capital
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