Optimism is on high alert as the U.S ISM Manufacturing data released yesterday showed a strong expansion in manufacturing, reaching the highest level in two years. U.S Markets followed suit after the news with the S&P 500 and Nasdaq reaching new highs by the close.
Market participants will keep a look out for any updates on the stalled COVID-19 relief package negotiations while the FED reiterates its dovish message.
Events leading up to the U.S. Non-Farm Payrolls (NFP) release on Friday the 4th of September 2020:
Wednesday, 2 September 2020:
U.S. ADP Non-Farm Employment Change
The ADP Non-farm Employment Change is expected to come in much higher than the previous month at around 900K and the data is expected today the 2nd of September 2020 at 14:15 SAST.
The U.S. ADP Non-farm Employment Change is an excellent predictor of the Non-Farm Payrolls report as the ADP Non-Farm Employment Change measures the monthly change in non-farm, private employment. The U.S. ADP Non-farm Employment Change is released two days ahead of the NFP jobs number.
Chart - The U.S. ADP Non-farm Employment Change
Thursday, 3 September 2020:
U.S Jobless claims:
Initial Jobless Claims - The initial jobless claims have been in a steady downtrend over the last couple of months since those record jobless claims numbers in April. The Jobless Claims number is expected to come in slightly lower than last week.
This week the Initial Jobless Claims data is expected to show initial jobless claims reduce to 950K and should be released on Thursday around 14:30 SAST.
Continuing Jobless Claims – This data point has also become a focal point and measures how many unemployed individuals qualify for benefits under jobless insurance. The data is also expected to see a slight decline in claims to around 14 million.
Chart - Weekly U.S jobless claims
US ISM Non-Manufacturing Purchasing Managers Index (PMI)
U.S economic growth comes in full steam back into focus as the earnings season dies down with ISM Non-Manufacturing PMI data for August later today around 16:00 SAST. The data is expected to come in lower at 57 which is still well above the 50 mark.
The ISM Non-Manufacturing PMI report is a composite index that reports on business and measures Business Activity, New Orders, Employment and Supplier Deliveries. The index is also used as an indicator to judge how well the economy is performing. A reading above the 50 indicates that the Non-Manufacturing sector is expanding while a reading below 50 indicates a contraction.
Chart - The ISM Non-Manufacturing PMI
Non-Farm Payrolls (NFP) outlook
Will we see another surprise Jobs number this Friday? It seems market participants are somewhat reluctant to believe the turnaround story despite positive PMI numbers in Europe and China. The impact from the COVID-19 pandemic is still very much a focal point in the U.S as we await all the PMI data to filter through this week.
Jobs number:
The number of new Non-Farm jobs for August is expected to be slightly lower than the previous reading but luckily remain in positive territory. The U.S. Non-Farm Payrolls number is expected to come in at 1.4 million from the previous month's surprise of 1.763 million Non-Farm jobs.
Hourly earnings:
The Average hourly earnings (M/M) number is expected to go into neutral territory at 0% from the previous months 0.2%. The Average hourly earnings (Y/Y) for August is expected to decrease slightly to 4.5% from the previous months number at 4.8%
U.S. Unemployment Rate:
The U.S. Unemployment Rate measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to show a decrease from the previous reading to 9.8%.
Why is the jobs number important?
The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month, and the number being released will have a direct impact on the markets. In the United States, consumer spending accounts for most of the economic activity, and the Non-Farm Payrolls report represents 80% of the U.S. workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs.
Technical Analysis outlook on U.S. Indices for the U.S Non-Farm Payrolls (NFP)
Wall Street 30
The Wall Street 30 Index might just get with the program after the Nasdaq and S&P 500 reached new highs after the positive manufacturing expansion data.
The Dow’s new tech stock additions, Salesforce, Amgen and Honeywell were added to the benchmark Index from the 31st of August 2020 and expect the index to capitalize on the upward momentum in the tech sector.
Our Wall Street 30 Technical Analysis outlook from last week mentioned “The price action has made higher highs and higher lows since July and is currently stalling at our resistance area of 28123. We need to see this area turn into a support level to push prices higher back to all-time highs and our third target price at 29390.”
This level has now turned into support and the price action should continue making higher highs and higher lows and close in on our possible target price of 29390.
Technical points to look out for on the Daily Wall Street 30:
- Price action is finding support at 28123 and needs to stay above this level to support another leg higher to the 29390 possible next target level.
- The 50-day SMA (blue line) is still pointing higher supporting the higher price move.
- The Relative Strength Index (RSI) is in overbought levels which also supports the upward momentum and should remain at these levels.
Charting done on Metatrader5 GT247.com - WallStreet30 Daily
Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 2nd of September 2020) U.S Market open.
What to trade internationally:
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Major indices to look at will be the S&P 500, Wall Street 30, Nasdaq 100
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Major Forex pairs to look at will be EUR/USD, GBP/USD and USD/JPY
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Commodity to look at will be Gold.
What to trade locally:
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Index to look at will be the ALSI
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Forex pair to look at will be the USD/ZAR
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Rand Hedges (BTI, CFR) and Rand Sensitives (Banks and Insurers)
There are many ways to trade the Non-Farm Payroll (NFP) report, and here are a few strategies traders look at:
- The Early birds: traders who will take an early position before the jobs number is released in anticipation that the directional movement the event will cause will be in their favour.
- The Scalpers: as the data is released, these traders will scalp and try and capitalize on the volatility that is created by the data, positively or negatively.
- The calm and calculated: as the market digest the results of the Non-Farm Payroll (NFP) report and after the volatility swings have occurred, these traders will take a position on the momentum of the market.
When and what time is the US NFP (Non-Farm Payroll) announced in South Africa?
Non-Farm Payrolls are usually reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released. The US Non-Farm Payroll number will be released locally on Friday the 4th of September 2020 at 14:30 SAST.
Sources – CNBC, Reuters, MetaTrader5, Koyfin
Barry Dumas | Market Analyst at GT247.com
Barry has 12 years experience in the financial markets. He enjoys educating clients on trading / investing and providing punchy technical analysis on securities. He currently holds a Wealth Management qualification and is studying towards becoming a Chartered Market Technician® (CMT) designation holder.
Disclaimer:
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice. Past performance is not necessarily an indication of future performance. The value of a financial product is not guaranteed. The value of a financial product can go down or up due to various market factors. The graphs are for illustrative purposes only.
