This month's non-farm payrolls (NFP) data release occurs at a major turning point. With a 9-3 FOMC vote last month (the rarest combination in years), markets are currently factoring in a 59-67% probability that the Federal Reserve will raise rates in September. Tomorrow morning’s report, however, can either solidify this bet or create massive volatility across markets.
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The Setup: What’s Expected
Tomorrow morning at 8:30 AM Eastern Time (12:30 PM London), the Bureau of Labor Statistics will release the Employment Situation report for July. Consensus estimates see a meaningful rebound from the meager 57,000 jobs added last month.
Metric Previous (June) Estimate (July) Range
Nonfarm Payrolls 57,000 80,000-88,000 40,000-157,000
Unemployment Rate 4.2% 4.2% 4.1%-4.3%
Average Hourly Earnings (YOY) 3.5% 3.5% 3.3%-3.5%
The NFP prediction markets suggest otherwise, however. Kalshi’s data on the event shows a roughly 47% probability that payrolls will exceed 80,000, while the average forecast lies between 70,000 and 80,000. The odds that the number comes in below 60,000 are about 33%.
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What Actually Moves Markets: The 4 Components
As previously mentioned, NFP isn’t simply the headline number. Instead, professional traders dissect all four individual components of the report. Here’s why each is important:
Component Purpose
Headline Payroll Number The most-watched figure; the change in the number of jobs in the economy.
Unemployment Rate The change in the labor force size and number of unemployed people from the Household Survey (complements the headline establishment survey).
Average Hourly Earnings A forward-looking measure of inflation generated from wage inflation. This metric can override the headline payroll figure if there are sufficient increases in pay.
Previous Month Revision Any significant revisions to the previous month’s report can impact sentiment on the latest release by modifying the perceived labor market trend.
Remember thatmarkets focus on the delta between expectations and the actual reported data rather than just the level itself. A 200,000 print versus a 250,000 estimate will likely have far less impact than that same 200,000 number coming in against a consensus for 130,000.
These four execution rules typically guide trades on NFP day:
*Place limit orders only - Do not ever enter NFP trades at market to avoid significant whipsaw at the release times when the bid-ask spread may blow out 5-10X its usual width.
*Avoid trading the first 60 seconds - Spikes are often artificial. Give price a moment to stabilize.
*Wait for follow through 30 minutes later - The second phase of price action is generally a better indication of trend direction.
*Use smaller position sizes - Cut your normal daily sizing by half or two-thirds due to the NFP's typical volatility of 2-3X average.
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Technical Setup: Gold Breaks Out
Gold has rallied over 3.12% in two days, eclipsing $4,200 at the time of writing, and broken through a descending trend line that’s capped rallies since earlier this year. A pair of bull RSI divergences over the June and July lows set the stage for the move.
Key Gold Levels
*Buy-Side Liquidity (BSL): $4,166 – $4,188
*Supply Resistance: $4,400 – $4,800
*Point of Control (POC): $4,063
*Sell-Side Liquidity (SSL): $3,986 – $3,944
There's substantial supply clustering around $4,400-4,800 where previous moves stalled. We’ve also seen very clear support form between $4,000-4,100, coinciding with this breakout.
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The Three Scenarios
1. Goldilocks(75K-100K; UE 4.2%)
Favored scenario for risk assets as it would support the narrative of a cooling but not collapsing economy. It would indicate there’s no urgency for the Fed to cutRates.
Gold: Might drift sideways within BSL & SSL.
Dollar Index (DXY): Minor weakness.
Fed Probability: Maintains 59% range for September.
2. Beat (100K+ Payrolls and/or high wages)
Suggests a more robust economy than expected, reinforcing the Fed’s need to maintain or hike interestRates.
Gold: Would likely push back down towards SSL ($3,986-3,944), and possibly much lower if liquidity bands below are hit.
DXY: Will likely lift towards 101.80-102.00.
Fed Probability: Surges well over 70% for a September Rate Hike.
Trap to avoid: solely trading the jobs number; watch average wages closely.
3. Miss (Below 60KPayrollsand/or rising unemployment)
The most shock-inducing report that would signal major cracks in the economy.
Gold: Soars toward BSL ($4,166-4,188) and eventually Supply $4,400-4,800.
DXY: Could accelerate its move down towards 98.60-98.00.
Risk Assets: Would see an initial rush upwards, but recession fears might take hold if the miss is severe. A break of $4,400 on the Gold chart could open the doors for moves back towards $4,600-4,800.
Important note:The rally in Gold this past week was partially triggered by a short-squeeze in trend following Funds (CTAs), not entirely organic longer-term buying. A strong print could see this rally quickly reverse.
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Dollar Index (DXY)TechnicalSetups
The dollar is sitting at a crossroads after declining almost 2.5% from its yearly high on June 1st.
Key DXY Levels:
Support $99.30 – 100.30
Critical Support $99.49 (38.2% Retracement)
Lower Zone $98.60 – 98.00
Resistance $101.80 – 102.00
A close below $99.30 on a weekly basis would signal that a major turning point has occurred and could usher in a move back to June’s yearly low near $98.60-98.00.
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