Henry Liu
Former FPA Special Consultant
- Messages
- 473
We’ll be trading the US NFP (Nonfarm Payroll) Employment Changes, it is the focus news release for the week. Here’s the forecast:
8:30am (NY Time) US NFP Forecast 190K Previous 191K
8:30am (NY Time) US Unemployment Rate Forecast 8.9% Previous 8.9%
ACTION: 250K BUY USDJPY / 120K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the medium expectation is around 190K, with an estimated increase in the private sector payrolls at +222K. Market has shifted up its sentiment towards private sector jobs after this week's positive ADP report...
The Unemployment Rate will be another important figure today as it is expected to remain unchanged at 8.9%. Because of the rapid drop in unemployment rate, which is the fastest in 50 years, market is likely to cut some slack if we get a slightly higher release today, as long as it does not go above the 9.3%, I believe market will be focusing on the NFP release.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (120K or worse) and Unemployment Rate (9.0% or worse), I’d be looking to BUY EURUSD or GBPUSD on a retracement.
On the other hand, if we get a positive NFP release (+250K or better) and the Unemployment Rate remains at 8.9% or better, JPY should weaken immediately as USD/JPY may recover and move above 83 to 84 throughout the trading session... I will be looking to BUY USDJPY, BUY USDCHF, BUY USDCAD, and I think most JPY crosses will move upwards as well.
If we get a conflicting release, we will wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, we will get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you’ll get a much clearer view.
Please read my detailed trading strategy for this release below…
The Market
Market is expecting NFP to once again be around 190K, which is the consensus of 62 economists surveyed by Bloomberg. With Wednesday's ADP showing private jobs growth at 201K, which matches the estimate of 222K of Private Job on the same Bloomberg survey, we are likely to get a very close to forecast release today.
With record exports, gains in consumer spending and confidence, plus positive announcements from companies such as General Motors Co. over hiring back all laid off employees by September, improvement in the Employment Sector is showing strong traction as we get ready to end the first quarter of 2011.
With no weather factors to consider, March's NFP is likely to be very close to estimate with a slight chance of upward surprise. Should we get a strong release, we could expect revision of the quarterly GDP by economists, which will indeed raise expectation for Fed tightening action in the near future.
However, with that being said, I'd still recommend everyone to follow the NFP strategy below, because no matter how optimistic the NFP looks pre-release, it is not a 100% sure thing...
NFP Trading Strategy
Below is a general guideline on how to trade NFP release. This is what I do with EVERY NFP release.
Let’s talk about how to trade this release: We’ll wait for the numbers to come out, but will not take any trade YET, even if we get our tradable figures (250K or 120K). We’ll wait for a possible revisions to the previous release numbers, which is 192K, as the market usually overreacts with the Revision and chances favor for this trade to work out if we do not get conflicting releases between the revision and the actual release; at this point, still stay out of the market.
Then the next step is to wait for the Unemployment Rate, which is expected to be at 8.9% from 8.9% prior. If the Unemployment Rate were to surprise higher, we’ll have to really make an executive decision at the time of the release and see what is the primary focus of the market.
After all of the numbers have been released. Wait for the market to push… then be patient and wait for a decent retracement before getting in. Look for recent support/resistance areas for entry as a high impact news with various components are extremely volatile, and those who are patient will always get a chance to enter with much better entry.
Additional Thoughts
We do have several choices to go LONG on USD and I believe USDJPY and GBPJPY may provide some of the best movements as both pairs are likely to benefit from BOJ intervention and strong USD.
Pre-News Consideration
I strongly suggest that any pre-news trade be closed at this moment. As with NFP releases, liquidity will die down from now until the actual release time because most traders are likely to sit on the sideline.
DEFINITION
“Measures the change in number of employed people during the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.”
Historical Chart & Data For US NFP Employment
Thanks,
8:30am (NY Time) US NFP Forecast 190K Previous 191K
8:30am (NY Time) US Unemployment Rate Forecast 8.9% Previous 8.9%
ACTION: 250K BUY USDJPY / 120K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the medium expectation is around 190K, with an estimated increase in the private sector payrolls at +222K. Market has shifted up its sentiment towards private sector jobs after this week's positive ADP report...
The Unemployment Rate will be another important figure today as it is expected to remain unchanged at 8.9%. Because of the rapid drop in unemployment rate, which is the fastest in 50 years, market is likely to cut some slack if we get a slightly higher release today, as long as it does not go above the 9.3%, I believe market will be focusing on the NFP release.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (120K or worse) and Unemployment Rate (9.0% or worse), I’d be looking to BUY EURUSD or GBPUSD on a retracement.
On the other hand, if we get a positive NFP release (+250K or better) and the Unemployment Rate remains at 8.9% or better, JPY should weaken immediately as USD/JPY may recover and move above 83 to 84 throughout the trading session... I will be looking to BUY USDJPY, BUY USDCHF, BUY USDCAD, and I think most JPY crosses will move upwards as well.
If we get a conflicting release, we will wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, we will get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you’ll get a much clearer view.
Please read my detailed trading strategy for this release below…
The Market
Market is expecting NFP to once again be around 190K, which is the consensus of 62 economists surveyed by Bloomberg. With Wednesday's ADP showing private jobs growth at 201K, which matches the estimate of 222K of Private Job on the same Bloomberg survey, we are likely to get a very close to forecast release today.
With record exports, gains in consumer spending and confidence, plus positive announcements from companies such as General Motors Co. over hiring back all laid off employees by September, improvement in the Employment Sector is showing strong traction as we get ready to end the first quarter of 2011.
With no weather factors to consider, March's NFP is likely to be very close to estimate with a slight chance of upward surprise. Should we get a strong release, we could expect revision of the quarterly GDP by economists, which will indeed raise expectation for Fed tightening action in the near future.
However, with that being said, I'd still recommend everyone to follow the NFP strategy below, because no matter how optimistic the NFP looks pre-release, it is not a 100% sure thing...
NFP Trading Strategy
Below is a general guideline on how to trade NFP release. This is what I do with EVERY NFP release.
Let’s talk about how to trade this release: We’ll wait for the numbers to come out, but will not take any trade YET, even if we get our tradable figures (250K or 120K). We’ll wait for a possible revisions to the previous release numbers, which is 192K, as the market usually overreacts with the Revision and chances favor for this trade to work out if we do not get conflicting releases between the revision and the actual release; at this point, still stay out of the market.
Then the next step is to wait for the Unemployment Rate, which is expected to be at 8.9% from 8.9% prior. If the Unemployment Rate were to surprise higher, we’ll have to really make an executive decision at the time of the release and see what is the primary focus of the market.
After all of the numbers have been released. Wait for the market to push… then be patient and wait for a decent retracement before getting in. Look for recent support/resistance areas for entry as a high impact news with various components are extremely volatile, and those who are patient will always get a chance to enter with much better entry.
Additional Thoughts
We do have several choices to go LONG on USD and I believe USDJPY and GBPJPY may provide some of the best movements as both pairs are likely to benefit from BOJ intervention and strong USD.
Pre-News Consideration
I strongly suggest that any pre-news trade be closed at this moment. As with NFP releases, liquidity will die down from now until the actual release time because most traders are likely to sit on the sideline.
DEFINITION
“Measures the change in number of employed people during the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.”
Historical Chart & Data For US NFP Employment
Thanks,
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