Trade Setups in USD-Majors Around January Nonfarm Payrolls
- Economists have overestimated 9 of last 10 JanuaryNFPs.
- See the February Forex Seasonality report and the implications for the majors.
The US Dollar is trading slightly off of its yearly highs ahead of the January NFP report, and traders have good reason to be concerned. Economic data has been roundly disappointing thus far in 2015, with the Citi Economic Surprise Index falling to -27.2, the lowest level since late-April 2014.
When we look at the consensus estimate for the January NFPs provided by Bloomberg News at +230K, we can’t help but think forecasters are exhibiting recency bias – allowing the positive jobs trend in 2014 to hangover into the January 2015 estimate. This is not a unique occurrence: over the last ten years, economists have overestimated the initial January print a total of nine times.
Our concern is increased when taking the January ISM Non-Manufacturing Employment subindex into account: at 51.6, it represented the slowest pace of growth since February 2014. A print below +200K would not be surprising; if so, the US Dollar could suffer against the Japanese Yen as yield differentials collapse further amid expectations of a Fed rate hike being pushed back.
--- Written by Christopher Vecchio, Currency Strategist
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