The July employment report, due on Friday at 8:30 AM ET (12:30 GMT), couldn’t arrive at a more important time. The Fed's rare 9-3 policy decision this past July 29 saw markets pricing in approximately 63%-73% odds of a September rate hike. Any dramatic deviation from these expectations could cause those odds to shift rapidly and ignite large, cross-asset moves.
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The Numbers: Consensus Versus the Signals
The consensus job creation forecast in July is estimated around 88,000 versus just 57,000 in June . But the wide forecast range (40k-157k+) speaks of the uncertainty underlying the forecast.
Metric Prior (Jun) Forecast (Jul) Nonfarm Payrolls 57,000 80,000-110,000 Unemployment Rate 4.2% 4.2%-4.3% Avg Hourly Earnings (YoY) 3.5% 3.3%-3.5%
Kalshi traders are calling it differently however, with Fed funds for September only betting a 47% probability that more than 80,000 payrolls will be reported and the cluster for job creation ranging between 70k-80k . There's an estimated one-in-three chance for below 60k jobs.
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The Three Scenarios
1. Goldilocks (70,000-100,000 | 4.2%-4.3% UE) - best case for risk assets; it signals continued cooling without significant economic contraction, diminishing pressure for more Fed tightening. - USD: Could ease back, albeit marginally. - Gold: Could break higher to test $4,118+. - Bitcoin: Might benefit from both a weaker US dollar and reduced rate expectations.
2. Hot (100,000+ | Wage growth remains sticky) - reaffirms a hot Fed going forward, raising the probability of a September hike. - USD: Likely to re-accelerate towards the 101.80-102.00 resistance area . - Gold: Could accelerate higher towards $4,000 or lower . - Fed Odds: September hike probability could spike above 70%.
3. Cold (Below 60,000 | Wage growth flat or down) - would be the biggest surprise for many participants. - USD: Would accelerate the downward move toward 98.60-98.00 levels. - Bitcoin and Gold: Could be the beneficiary of reduced Fed expectations and a lighter US dollar.
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The Technical Picture
The Dollar Index (DXY) is treading water around the 99.50-100.30 range and remains under a tight grip between the Fed hawks and global coordinated selling. It found support at 99.50 last session and a move beneath the range should open the door to 98.85.
Gold continues to be held in its established range between $4,020 to $4,118 and a move through either could signal the likely direction for the metal throughout August.
EUR/USD holds below the 1.1560 resistance level. The NFP is expected to be catalyst for a either breakout or collapse above or below that.
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