USD: trading April NFP

March

Judging by market expectations, the NFP data coming in a few hours today are going to be very heavy. The previous release referring to the month of March brought the shocking -701K jobs removed from the labor market. That ended almost 10 years of unstoppable expansion and did that in a very fierce manner. The unemployment rose to 4.4% the last time, but compared to what may come today, this number may appear absolutely insignificant.

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Scenarios

Observers forecast the labor market in the US to shrink by 22mln jobs – something unseen since the times of the Great Depression. Noting the total initial jobless claims at more than 33mln accumulated since late March, that figure appears to be as reasonable as devastating. The unemployment is thought to reach 16% - something no one would believe possible just a couple of months ago. Based on that, there may be several scenarios.

Moderate

In this scenario - which is actually most probable as the market factored in the coming heavy data for April pretty long ago - the actual NFP figures will be roughly within the forecast. If that happens, the USD is likely to be relatively impartial. If the data undershoot the expectations but not too far away, the USD/JPY may lose and the EUR/USD may gain a bit.

Below the forecast

Noting the particularity of the situation, it implies that the data will be really devastating. Although it is hard to believe that, we cannot exclude the possibliity that what comes will be significantly below the forecast. Obviously, the USD will drop value in this case but later on will probably quickly recover the loss - it's important to be prepared for that recovery.

Better than predicted

Being statistically fair, this is also a possibility. If April NFP reveals brighter spots in the market, the USD will gain value.

So brace yourself and get ready to trade some turbulent news.