NFP Preview: Why the US Dollar Could Be More Volatile Than Usual

"Newspaper snippet of jobs board"
Matt Weller
By :  ,  Head of Market Research

NFP Key Points

  • NFP report expectations: +187K jobs, +0.3% m/m earnings, unemployment at 3.8%
  • Leading indicators point toward an almost dead-on expectations reading in this month’s NFP report, with headline job growth in the 165K-215K range
  • The recent consolidation in the US Dollar Index and the Fed’s renewed data dependence could lead to a more-volatile-than-usual reaction in the US dollar.

When is the January NFP Report?

The January NFP Report will be released on Friday, February 2, at 8:30 ET.

NFP Report Expectations

Traders and economists expect the NFP report to show that the US created 187K net new jobs, with average hourly earnings rising 0.3% m/m (4.1% y/y) and the U3 unemployment rate ticking up to 3.8%.

NFP Overview

Tomorrow brings the first NFP report covering 2024 data, and based on the market’s expectations, the jobs market may have gotten off to a strong start to the new year:


Source: StoneX

In the wake of Wednesday’s FOMC meeting, I expect jobs (and inflation) data to take on a renewed importance for traders. Fed Chairman Powell noted that the central bank doesn’t necessarily need to see improving economic data to start cutting interest rates, just more of the same solid data that we’ve seen over the last six months; however, he also noted that a slowdown in the labor market could prompt earlier interest rate cuts, implying that the next few jobs reports will be particularly important.

NFP Forecast

As regular readers know, we focus on four historically reliable leading indicators to help handicap each month’s NFP report, but given the vagaries of the calendar this month, the ISM Services PMI report won’t be released until Monday, leaving just three leading indicators of note:

  • The ISM Manufacturing PMI Employment component ticked down to 47.1 from 47.5 last month.
  • The ADP Employment report showed 107K net new jobs, a substantial decrease from last month’s downwardly-revised 158K reading. 
  • Finally, the 4-week moving average of initial unemployment claims held steady at 208K, essentially unchanged from last month.

Weighing the data and our internal models, the leading indicators point to an almost dead-on expectations reading in this month’s NFP report, with headline job growth potentially coming in somewhere in the 165K-215K range, albeit with a bigger band of uncertainty than usual given the current global backdrop.

Regardless, the month-to-month fluctuations in this report are notoriously difficult to predict, so we wouldn’t put too much stock into any forecasts (including ours). As always, the other aspects of the release, prominently including the closely-watched average hourly earnings figure which came in at 0.4% m/m in the most recent NFP report.

Market Outlook EUR/USD

Potential NFP Market Reaction


Wages < 0.2% m/m

Wages 0.2-0.4% m/m

Wages > 0.5% m/m

< 150K jobs

Strongly Bearish USD

Bearish USD

Bullish USD

150-225K jobs

Strongly Bearish USD

Neutral USD

Strongly Bullish USD

> 225K jobs

Bearish USD

Bullish USD

Strongly Bullish USD

As we detail below, the US Dollar Index saw a strong rally to start the new year but has mostly consolidated in a tight range over the last couple of weeks, leaving a relatively neutral outlook toward the currency heading into the jobs report. That said, the recent consolidation and Fed’s renewed data dependence could lead to an outsized move in the US dollar on the back of this month’s NFP reading.

US Dollar Technical Analysis – DXY Daily Chart


Source: TradingView, StoneX

Looking at the broad US Dollar Index (DXY), the most relevant technical consideration is the tight 2-week consolidation between 103.00 and 103.80. The top of this range is marked by DXY’s 200-day EMA and the 50% Fibonacci retracement of the November-December drop, representing a key confluence of resistance levels that bulls would have to overcome in the event of a strong jobs report.

While the current technical and fundamental backdrop doesn’t necessarily offer a strong directional bias ahead of the NFP report, it presents a potentially clean medium-term setup: If DXY breaks out above 103.90 on the back of a strong jobs report, the path to 104.60 or even the mid-105.00s is relatively clear, whereas a soft jobs report and a break below 103.00

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

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