- Leading indicators are mixed, leaving revisions as the wild card.
- President Biden summoned a press conference, potentially lifting expectations.
- With one exception, mean reversion is the preferred trading strategy according to a new study.
An increase of 664,000 jobs is what the economic calendar shows for May's Nonfarm Payrolls – but last-minute adjustments should be noted by those trading the event with currencies.
1) Revisions, not leading indicators
ADP's showed a whopping leap of 978,000 jobs but the ISM Services PMI's employment component tumbled to near stall-speed. These contradictory figures offset each other and leave the headline projections roughly unchanged.
However, a look back at last month could be significant. April's NFP was a bitter disappointment – only 266,000 instead of nearly one million expected. Speculation about the nature of that figure has been rife, with seasonal adjustments being the main culprit. Apart from the headline, the fate of revisions is critical. Without a large upside move, the dollar could fall.
2) What does the White House know?
US President Joe Biden called a last-minute press conference to speak about the jobs report. Republicans have accused his generous stimulus for pushing people away from work and using April's figures as proof. The White House receives the NFP in advance.
Does that mean that Biden is set to take a victory lap and lash back at critics? Perhaps, and maybe he will only come out to say the road to recovery is long, justifying more help. However, the presser announcement caught investors' attention and that could lift expectations.
Expecting a bullish Biden and expectations of substantial revisions mean markets lean toward a higher NFP.
3) Mean-reversion and patience
Many traders are focused on breakouts – buy high and sell higher, sell low and buy even lower. However, a new study by FXStreet's Eren Sengezer shows the moves are wild in the first 15 minutes, almost all currency pairs return to previous levels within an hour. That includes EUR/USD, GBP/USD, and AUD/USD. The only exception is USD/JPY. For those willing to stay longer on Friday, dollar/yen also returns to the line within four hours.
See the full analysis, including the number of pips each pair moves:
US May Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
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