US Nonfarm Payrolls Forecast: Analyzing April NFP release

• Nonfarm Payrolls report is expected to show a job addition of 179,000 in April.
• US Dollar could react to wage inflation component, the Average Hourly Earnings.
• The Bureau of Labor Statistics is set to report an Unemployment Rate of 3.5% in April.

The Nonfarm Payrolls (NFP) data will be released by the Bureau of Labor Statistics (BLS) this Friday at 12:30 GMT. The NFP release is expected to show job gains of 179,000 in April following the 236,000 increase recorded in March. 

The US Dollar (USD) has been struggling to find demand in the second half of the week with dovish Federal Reserve (Fed) bets dominating the financial markets. April jobs report is likely to trigger the next big action in the USD due to its potential impact on the Fed’s policy outlook.

Although the Fed raised its policy rate by 25 basis points (bps) to the range of 5-5.25% as expected, it scrapped the comment in the policy statement that read “some additional policy firming may be appropriate. Commenting on the labor market conditions in the post-meeting press conference, FOMC Chairman Jerome Powell noted that there were some signs suggesting that supply and demand were coming back into better balance. "There are no promises but it's possible we can continue to have labor market cooling without big increases in unemployment," Powell added.

What to expect in the next Nonfarm Payrolls report?

Friday's United States (US) economic docket highlights the release of the closely-watched US monthly jobs report data for April. Nonfarm Payrolls expectations are that the economy added 179K jobs during the reported month, down from the better-than-expected growth of 236K in March. The Unemployment Rate is expected to remain unchanged at 3.5% in the fourth month of this year. 

Investors will also pay close attention to the Average Hourly Earnings, which is forecast to hold steady at 4.2% on a yearly basis, and the Labor Force Participation readings in the report.

Analysts at Wells Fargo expect payrolls growth to continue to softer at the beginning of the second quarter: “Slowly bending, not breaking, has so far been the story of the labor market this year. That is unlikely to change with April's employment report. In March, nonfarm payrolls rose by 236K, the weakest print since December 2020. Signs were more encouraging in the separate household survey, where employment rose by 577K, causing the unemployment rate to tick back down to 3.5%. The labor force participation rate also rose for a fourth straight month.”

When will US February Nonfarm Payrolls report be released and how could it affect EUR/USD?

The Nonfarm Payrolls report is scheduled for release at 12:30 GMT, on May 5. With the US Dollar staying dangerously close to its weakest level against the Euro in nearly a year in the Fed aftermath, market participants will pay close attention to the labor market data to figure out whether EUR/USD could extend its rally.

In case the report reveals that labor market conditions remained tight with an NFP increase at-or-above 250K combined with a hot wage inflation print, market participants could re-assess the probability of one more 25 basis points (bps) Fed rate hike in June. In that scenario, the USD should gather strength heading into the weekend and cause EUR/USD to erase a portion of its weekly losses. It’s worth noting that the CME Group FedWatch Tool shows that the probability of a June rate increase less than 5%.

On the other hand, a disappointing NFP print, close to 100K, should confirm a pause in the Fed’s tightening cycle and even revive expectations for a rate cut later in the year. The USD is likely to come under renewed bearish pressure in such a case and provide a boost to EUR/USD during the American trading hours on Friday.

Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the EUR/USD pair and writes: “Euro bulls appear hopeful so long as they hold above the upward-sloping 21-Day Moving Average (DMA) at 1.0985. The 14-day Relative Strength Index (RSI) is pointing north above the midline, adding credence to the upside bias.”

Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, Euro buyers need acceptance above the recent range highs around 1.1090 to resume the uptrend Ahead of that, EUR/USD needs to find a strong foothold above the 1.1050 psychological mark. Alternatively, immediate support awaits at the bullish 21 DMA, below which the weekly low of 1.0942 could be tested before bears gear up for a test of the ascending 50 DMA at 1.0839.

Nonfarm Payrolls related content

• Gold Price Forecast: XAU/USD seems poised to test ascending channel hurdle, around $2,100
• EUR/USD extends recovery above 1.1040 as USD Index drops further, US NFP remains key
• US payrolls in focus, as the US banking turmoil continues

About the Nonfarm Payrolls report

The Nonfarm Payrolls released by the US Department of Labor presents the number of new jobs created during the previous month, in all non-agricultural business. 

The monthly changes in payrolls can be extremely volatile, due to their high relation with economic policy decisions made by the US Federal Reserve. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. 

Generally speaking, a high reading is seen as positive (or bullish) for the US Dollar, while a low reading is seen as negative (or bearish), although the previous month's reviews and the Unemployment Rate are as relevant as the headline figure.