« Soybean Rally Crushed By Bearish Planting Intentions | Main | Will OPEC Cuts Fail on Shale? »

Traders Anticipating "Solid" Payrolls Report

Friday, April 7, 2017

Today's Spotlight Market

The following are the average pre-report estimates for this morning's Non-farm Payrolls report:

Non-farm Payrolls: +180,000 estimate vs. 235,000 February
Unemployment Rate: 4.7% estimate vs. 4.7% February
Ave. Hourly Earnings: +0.3% estimate vs. +0.2% February
Ave. Workweek: 34.4 hours estimate vs. 34.4 hours February

Fundamentals

Market participants are once again expecting another "Goldilocks" payrolls report this morning, with an expected 180,000 jobs being created in February. While traders have scaled back their expectations from the 230,000 plus jobs that were created in January and February, there are some signs that a positive "surprise" could be in the works. First, we have the private sector employment report from payroll provider ADP, which is normally released on the Wednesday prior to the government payrolls report. Here ADP reported that U.S. private sector payrolls increased by 263,000 jobs, with the service sector accounting for 181,000 jobs. The widely watched manufacturing sector created 30,000 jobs according to ADP, which would be the 3rd consecutive month of jobs growth for the important employment sector. In addition, the most recent report on Initial Jobless Claims showed a decrease of 25,000 to a seasonally adjusted 234,000 for the week ending April 1, which was well below the 250,000 analysts were expecting. So while there is no 1-for-1 correlation between the ADP or Jobless Claims data and what the Bureau of Labor Statistics will report this morning, an upward "surprise" in the jobs data would not be out of the question.

Technical Notes

Looking at the daily continuation chart for 10-year Note Futures, we notice prices trading towards the upper bounds of the 4-month consolidation pattern where the market has traded within a relatively tight 3 ½ point range. Prices are currently holding just above the 20-day moving average (MA) but remain well below the widely watched 200-day MA which is currently hovering near the 128-00 price level. Trading volume has been fairly steady during the formation of the consolidation pattern, with the only real volume "spike" tied into the quarterly rollover. Momentum as measured by the 14-day RSI remains strong, but seems to have run into some headwinds of late, with a current reading of 62.74 as of this writing. Chart resistance is seen at the November 30 high of 125-26.5, with support seen at the December 15 low of 122-14.5.

Mike Zarembski, Senior Commodity Analyst