The Russian invasion of Ukraine has been driving the price of the Dollar, as investors look for stability in the greenback. While geopolitical tensions are dominating the currency market, Friday’s Non-Farm Payroll’s figure could help push prices further. 

What to expect from the March non-farm payroll data

The past week has seen volatility strike the foreign exchange market after Russia invaded Ukraine. With no resolution in sight and conflict escalating, the war is expected to continue impacting the currency markets. While Friday’s payroll figure is likely to be overshadowed by developments in Ukraine, traders and the Fed will still be keeping an eye on its release. 

February’s figure came in at 467K, over four times its forecast of 110K. While analysts’ expectations were way off last month, history is unlikely to repeat itself for today’s release. 407K is the forecast for March and it is anticipated this could be higher as coronavirus restrictions have eased, allowing for more job creation. 

The Fed, as always, will be paying close attention to the jobs report. Traders expect a 25 basis point rise in interest rates for mid March, which is already priced in. However, there has been growing speculation about a 50 basis point hike, with this month’s non-farm payroll number having the potential to sway the Fed into faster rises. 

ADP non-farm employment change

The precursor to the jobs report released on Wednesday showed 475K jobs were added to the private sector in February. This came in higher than the 400k that was expected, and the figures for January were significantly revised to boot. They were adjusted to show a net gain of 509k, instead of the 301k loss previously reported. The leisure and hospitality sector saw the largest increase with 170K jobs created in February, driven by the reduction in coronavirus restrictions. This strong ADP figure may give clues as to what could be expected on Friday. 

How to trade the non-farm payroll data

Today’s data is likely to be overshadowed by other events and may see less activity than normal. Traders will be monitoring how far above or below the payroll figure is compared to analyst expectations; a stronger than anticipated release will provide opportunities to sell dollar crosses, while a weaker number could help time buys for USD crosses.

EUR/USD outlookSource: Tradingview

Dollar strength kicked in last Thursday when Russia began its invasion, which resulted in EURUSD starting to break out of the tight range it’s been trapped in since last year. The daily chart suggests its downtrend could continue following its consolidation. If the non-farm payroll figure is heavily positive, the Euro could slide further against the Dollar.  

Early trading on Friday saw the pair break into an imbalance area at 1.1070 – 1.1030. Lower is another imbalance that  formed in May 2020 between 1.0930 – 1.0915. A strong NFP number could help push the market lower to the 1.0930 level (orange line on chart). Although, a weaker than expected number could see a break back higher towards 1.1127.

USDCAD outlookSource: Tradingview

USDCAD, seen on the 4hr chart above, was trapped in a tight range for much of February. Last week saw a break higher when the US dollar strengthened on the back of the Russian invasion. The price spiked to a price gap from December last year, before falling back into its range. 

The payroll data could provide a couple of scenarios worth noting. If a weaker than expected figure is released, the USD would likely react negatively seeing the pair drop towards an imbalance at around 1.2544 – 1.2532. The Friday Asian session saw the pair reclaim the lower end of its range. If NFP is better than anticipated, USD strength could see a push back towards range highs and further to the higher gap at around 1.2870.

GBPUSD outlookSource: Tradingview

Last week’s sell-off in cable resulted in the GBPUSD pair consolidating for much of this week. Sunday’s gap was quickly closed before price pushed to the upper end of its range. It has since moved lower before bouncing back higher. The 1 hour chart shows the market could continue lower, running for liquidity below its lows. 

Stronger than expected data from the payroll would favour shorts, with initial targets being set at the range low of 1.3273. Weaker than expected data would likely see cable run higher towards the upper end of its range at 1.3437. Looking for entries at mid range would leave around 80pips on either side.

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