A1 Trading Company

December 7, 2023

NFP Tomorrow

Frank Cabibi

Here are some more setups for tomorrow's NFP numbers in the US. There could be a bullish case for both scenarios of a higher or lower number, and here's why.

EdgeFinder Analysis

UJ is no longer a bullish reading on the EdgeFinder. The recent score flip happened just days before the nearly 2% drop in price today after Ueda hinted to higher rates in the future. Getting interest rates back to positive is a huge momentum shifter in JPY pairs.

Because of this, the yen will probably not be in any more weakness for some time, as loose policy is coming to a close. On top of this, investors are anticipating rate cuts in 2024 in the US. This could be the start of a long term down trend in the UJ pair.

The bullish case for NFP tomorrow can be argued either way. So we should weigh the options in the short term on what could be the best potential play. Higher NFP is a good sign for the economy, and it generally causes more demand in the stock market.

However, more jobs can lead to more spending which could lead to higher inflation. Less jobs means there was a slowdown in the labor market which is also a good sign that the Fed will continue to keep rates at a hold or think about cuts in the future.

EURUSD is a bullish reading on the EdgeFinder right now from what used to be a bear score in November. USD pairs like EU and GU tend to share similar behavior to the US stock market. So, the argument stated above for SPX500 applies to EU.

On top of this, COT is more interested in the euro according to the last week's COT report. Meanwhile, retail remains mixed on this pair. Seasonality points towards the most bullish month of the year as well. The only factors holding this pair back from being a strong buy are retail, inflation and trend reading.

Retail Spotlight

Retail sentiment is now short on all the US indices while mixed on the majority of US pairs. The most longed pairs are USDCHF and AUDUSD, leading to a contrarian signal from the EdgeFinder.

Smart Money Spotlight

Smart money still shows selling on the USD and JPY. But this Friday's report may show a positive change into the yen from Tuesday this week. EUR and SPX saw considerable interest from institutions as well indicating more risk-on sentiment.

Fundamental Spotlight

When comparing the labor markets of both Europe and the US, EUR has the advantage. The pair needs to see another miss in NFP numbers tomorrow to keep the strong +3 score in the labor market section.

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