Today’s US Non-Farm Payroll report is poised to be the focal point, concluding a week brimming with significant market events. Expectations are set for moderation in headline job growth to 178k in January, from December’s robust 216k. Additionally, unemployment rate is anticipated to inch higher to 3.8% from 3.7%, while the pace of average hourly earnings growth is projected to decelerate to 0.3% mom.
Preliminary indicators such as ADP private employment figure, which registered growth of only 107k, and a slight dip in ISM manufacturing employment component to 47.1, suggest potential softness in the headline job growth. However, wage growth aspect remains a wildcard, capable of influencing market dynamics significantly.
A key post-NFP development to watch is in 10-year yield, which has witnessed a marked decline throughout the week. The strong downside momentum now amplifies the likelihood that the overarching downward trend from 4.997 peak is resuming.
A weekly close below 3.785 support would corroborate the bearish case, and steer 10-year yield to 61.8% projection of 4.997 to 3.785 from 4.198 at 3.448 this quarter, before it could find a bottom. That would also keep Dollar pressured, in particular against Yen.