Today's US jobs report is all about what could derail a March hike

Out of all the jobs reports over the last few years, this is probably one of the least important in terms of Fed hike expectations.

With a March rate rise a done deal in all bar the paperwork, it would take something absolutely calamitous in this one indicator to derail a hike. There's probably more chance of me sprouting hair and having a ponytail by 1.30GMT than there is of something catastrophic happening to NFP today.

US non-farm payrolls

We are still in the midst of the longest positive run of payrolls numbers since records began. Wages are expected to grow at 2.8% vs 2.5% prior (down from 2.8% in Dec). Unemployment is forecast at 4.7% vs 4.8% last month. The scale at which these would have to collapse at would be unheard of.

So what would stop the Fed from hiking? NFP -200k and wages posting negative would be a start.

For trading, our first thought is where lies the biggest risk? If you take my example you can see how ridiculous that risk might be.

But, what if we get a moderately bad set of numbers? The market will move naturally on the numbers as it always does. A big miss on NFP will see the dollar dive in nano seconds before probably recovering if the rest is ok. If wages do have a bad day and drop under something like 2.0% y/y, the dollar's fall will last longer.

And there in lies the trade. The buck will rise if the numbers aren't horrendous, as we'll see a relief rally that this risk event is over without a hitch, just like we did with ADP. The problem is that the upside is starting to get very crowded in the short-term so we always run the risk of seeing some profit taking after a good number, like we did with ADP. For me, the better trade would be to buy the dip on a bad but not FOMC changing set of numbers. A good dip of something like 50 pips+, or down to a half decent support level (Like 114.60/75), is where I'd look for a last minute FOMC long.

USDJPY H4 chart

There's always the chance that the market overplays a bad number, and thus the dollar falls hard but unless it's a game changer, it's not going to rock the Fed, and it's likely to come ripping back.