Based upon the most recent data that we have received today and over the past few weeks, 175k will be a tough hurdle to overcome:

Layoffs Rise 42% in May: The latest Challenger report of planned job cuts in May jumped 42% compared to the previous month with layoffs in the technology sector increasing eight fold. This follows the sharp dip to five year lows in job reductions that we saw the previous month. It will be interesting to see if this shift in trend supports a similar directional change in payrolls. According to John Challenger, the CEO of the consulting group that releases the report, "with so many question marks in this economy, employers appear to be in a holding pattern.” He adds that, "more companies are retaining their workers, but they seem reluctant to add workers." We would not be surprised if this really is true, since the combination of high input costs, weak European demand and mixed economic data could entice employers to be a bit more conservative with their hiring plans.

Jobless Claims Coincides With Weaker Payrolls: Including today’s jobless claims report, the four-week average of claims in May is 334k, compared to April’s five week average of 325k. The last 2 times that average claims were approximately 334k, was back in March (336k) and January (330k), when we saw 146k and 124k non-farm payroll gains respectively. This suggests that May’s jobless claims data should coincide with a weaker number in payroll growth.

Manufacturing Sector To Shed More Jobs: Given the barrage of weak manufacturing sector data, it is a near consensus at this point that we should see the third consecutive month of jobless losses in manufacturing sector. The employment index of the ISM survey dipped into contractionary territory for the first time in 18 months. Even though non-farm payrolls has managed to register impressive gains despite weak manufacturing employment, the negative number will definitely drag the overall NFP number lower.

Yet there may be cause for optimism:

Consumer Confidence Remains Upbeat: Both the Conference Board and the University of Michigan consumer confidence surveys registered increases in the month May despite mixed economic data. The "Jobs Are Plentiful" component of the Conference Board's Consumer Confidence report also rose to 22.6% in May, up from 20.4% in April. In fact, this was the highest reading in nearly four years.

Construction Sector Employment Expected To Be Strong: Given the strength of the housing market, construction sector employment is expected to have registered strong gains in the month of May. Jobs in the sector have increased steadily for the fourteenth consecutive month through April and according to our friends at Thomson Financial, construction employment has accounted for slightly less than 20% of the total job growth that month.

The risk is tilted more towards a downward surprise in payrolls and given the mix of current speculative positioning, we expect a weak non-farm payrolls number to cause a sharper reaction in the EURUSD than a strong number would. With everyone already long dollars, there aren’t much more players left to buy dollars and in fact, bears could be sitting tight and waiting for the results of NFPs to take profits on their shorts, which would result in a nice contra-trend move.