(By Mike Kulej) Leading to the NFP report tomorrow, markets focused on ADP Employment Change today. According to this payroll provider, private businesses added 133 K jobs. While this may look impressive when compared to 113 K a month ago, that is only because numbers for April were the lowest in seven months. In addition, the 133 K reported today was short of the expectation of 144 K. To make matters worse, the Initial Jobless Claims for last week showed another increase in first time applicants, jumping to 383 K, versus the forecast of 370, the highest in five weeks. That is also higher than the previous reading of 373 K (revised).
The so-called Challenger Job-Cut report, which provides information on the number of announced corporate layoffs, jumped by 67% on year over year basis in May and 52% month-over-month. At 62 K, it was also at the highest level in 8 months. While there is no direct correlation between this report and the NFP tomorrow, it adds to a general bearish undertones set in motion today. This means, that, if at all possible, there will be an even higher level of anticipation and stronger reaction by currencies, especially if the actual deviates substantially from the forecast of 158 K improvement. We can expect jump in spreads falling liquidity around the event, leading to treacherous trading conditions.
Last month response from currencies was volatile and did not result in a trend. Hard to say what is going to happen tomorrow, but it is probably best to take a "wait and see" approach. My intention is to wait at least 15 minutes following the announcement and only then join in the direction the trend, if one is discernible. Because there are several other important announcements from Europe, the London session could bring decent price swings in currencies. I will try to look for short-term breakouts at the open, focusing on the majors. Objectives will vary from pair to pair, but should fall in a range between 25 and 40 pips.