The first Friday of a new month. We all know what that means in the FX world – US Non-Farm Payroll data. Normally the FX community gathers around their collective screens excitedly awaiting the release with a miss of 30k jobs in either direction sparking a flurry of activity. A change in the unemployment rate of 0.2-0.3% can have traders frantically reacting to get on the next move. And even the average hourly earnings data is closely watched for any impending signs of inflation. Yes, we remember it well. But that was normal times. These are not normal times, not by any stretch of the imagination. The new normal is hard to digest, frightening in its magnitude and has most traders wondering how to react.

A UK bank holiday would mean less liquid trading conditions than normal for NFP Friday, but in the end it made little difference to the day’s price action. The headline data came out ‘better’ than expected. ‘Only’ 20.5 million jobs lost as opposed to 22 million expected. A jump in the unemployment rate to ‘only’ 14.7% versus 16% expected. And how about a 7.9% rise in average hourly earnings? ‘Better’ is of course all relative. This data shows the largest drop in NFP on record accompanied by the highest unemployment rate since the 1940’s And the jump in average hourly earnings paints an alarming picture in itself. The increase comes from so many lower paid workers losing their jobs. Gig economy workers, people on minimum wage, employees in the bar and restaurant sector that rely so heavily on tips. There is nothing better about these numbers. They are a modern-day disaster. The FX market reaction is muted. They were expecting bad. They got bad. And if you believe some economists, the real numbers are even worse due to issues in data gathering and lack of actual responses. USDJPY, so often the ‘go-to’ currency pair on NFP data, actually makes mild gains on the day, rallying from a low near 106.20 to close just shy of 106.70. EURUSD and GBPUSD would follow similar paths, both rallying strongly off their lows, to close mid-range at 1.0835 and 1.2410 respectively. A rather confused reaction you might say, by a market that clearly didn’t know how to react. The biggest ‘surprise’ would be in the equity markets. The prior day’s close for the Nasdaq had seen the tech heavy index close positive on the year. And given these numbers weren’t ‘as bad as expected’ and given everyone believes we will bounce back, equities built on that positive momentum to close at their highs. The DJ would end the day up 1.9% or 455 points.  This on a day when we announced 12 years of job growth wiped out in a single month. At a time where 20+ million households wonder where the next paycheck is coming from. They more than anyone hope the equity markets have it right. For their sake, I hope they are too.

For a little technical analysis I am going to turn to an asset that largely ignores major data releases such as NFP. Bitcoin. BTC has hit the headlines recently as it has rallied strongly ahead of a well documented ‘halving’.  Now I’ll be the first to admit that crypto in general is not the easiest asset class to analyse from either a technical or fundamental standpoint. But looking at this chart we can see each recent move above the psychologically important 10,000 level has been short-lived. Has this current rally run into another proverbial brick wall? Another case of ‘FOMO’ leading to a false rally? A drop of 12% over the weekend might have crypto bulls concerned. One to watch over the coming week, with the actual halving happening on May 12th.

David Hannigan

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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