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Forex Signal (Fri February 4 2011, 8:30am NY Time EST) - US NFP Employment Change

Discussion in 'Current Forex Trading Signals' started by Henry Liu, Feb 4, 2011.

  1. Henry Liu

    Henry Liu Former FPA Special Consultant

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    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 140K Previous 103K
    8:30am (NY Time) US Unemployment Rate Forecast 9.5% Previous 9.4%
    ACTION: 210K BUY USDJPY / 70K BUY EURUSD

    The Trade Plan

    With today’s release, as per a special report by Bloomberg, the medium expectation is around 140K, with an estimated increase in the private sector payrolls at +145K. Market has shifted up its sentiment towards private sector jobs after this week's slew of positive PMI figures and Wednesday's ADP report...

    The Unemployment Rate will be another important figure today as it is expected to increase slightly from 9.4% to 9.5%. If you remember, last Unemployment came out at 9.4%, which is probably a result of Jobless Claims filing decrease due to end of year holidays... Therefore, even if we get 9.6% or 9.7% of Unemployment Rate, market would probably not react with extreme volatility... However, if the Unemployment rate is above the psychological 10.0% level, then expect heavy USD sell-offs.

    The Plan
    Here's the general plan: If we get a significantly lower release on the NFP (70K or worse) and Unemployment Rate (9.7% or worse), I’d be looking to SELL USDJPY, SELL GBPJPY, BUY EURUSD, BUY GBPUSD on a retracement.

    On the other hand, if we get a positive NFP release (+210K or better) and the Unemployment Rate remains at 9.5% 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.

    If we get a conflict release, we will wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, there will be plenty of opportunities for entry. If you just wait for 5 minutes before making an entry, you’ll get a much clearer view.

    Please read my detailed trading strategy for this release below…

    The Market
    Market has been trading with renewed optimism for the EUR as a resolution to the debt crisis is just around the corner... Therefore for the better part of the 2011, we've seen USD under considerable pressure; however, if we get a significant improvement in today's releases, USD could be mounting a major rally as most European majors are at strong resistance levels.

    As usual, this release is probably going to define the general direction for the USD for the rest of the month... With yesterday's Trichet Press Conference ended with some disappointment in the Euro, a strong contrast in today's figure will change the short-term trend. However, if we get an inline or worse than expected number, EURUSD will definitely recover and retest 1.3850 levels...
    Important Note: I believe the general market will be focused more on the Private Sector jobs, which are expected at a +145K. If we get a strong number, let's say in the range of 200K+, even if the NFP headline is inline or slightly less than expected, traders should have no problem in going LONG on USD.

    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 (210K or 70K). We’ll wait for a possible revision to the previous release number, 1which is 103K, 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 9.5% from 9.4% 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. Remember that the significant improvement last month (0.3%) was due to seasonal factors, therefore market should not react much even if we get 9.6% or so... As long as we don’t go over the 10.0% psychological level, I think traders may not even focus on this release.

    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
    With EURUSD hovering around the 1.3600 and AUDUSD just hovering the 1.0200 level, on a stronger NFP release, we could see significant losses in both pairs.

    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,


    [​IMG]
     
    #1 Henry Liu, Feb 4, 2011
    Lasted edited by : Sep 8, 2016
  2. PipDog

    PipDog Corporal

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    WTF Was That?

    I'd say that both the Canadians and the Americans need to change their calculator batteries. How can an Employment report (both actually) be so conflicting. I call BS...no friggin' way.

    Trying to guess the lies within these reports is getting a little hard to do.
     
  3. Maluco

    Maluco Private

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    What the heck was that...?!

    Had to bail out with +4 pips and it was really confusing numbers.
     
  4. Philip Benveniste

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    I agree with you my friend...what the heck?
    But i think tha large deviation -0.5 in unemployment prevailed.

    Philip
     
  5. Rajgopal

    Rajgopal Recruit

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    NFP and the stunning aftermath

    Despite the NFP coming out at a dismal 36 K the EUR-USD pair instead of climbing dropped like a rock! Cannot figure out how the NFP trading works!!!
     
  6. RahmanSL

    RahmanSL Major

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    "Despite the NFP coming out at a dismal 36 K the EUR-USD pair instead of climbing dropped like a rock! Cannot figure out how the NFP trading works!!!"

    Yup, indeed! I too have read all over the internet forums saying that the EUR/USD will head North with a less than expected NFP result. So, where is the logic, and where is the beef??

    As some well seasoned Traders posted here and elsewhere, after years of analyzing fancy multicolored charts, news, EAs, complicated but impressive strategies, and in fact doing all what successful and profitable Traders are supposed to do, they are reverting back to trading like they did back when they were relatively Newbies before they became "learned, wise, and seasoned Traders"....i.e they are reverting back to trading what the actual market movements are doing on their charts right in front of their computer screen.

    Luckily for myself, I was stuck on quite a numbers of short positions on EUR/USD and that unexpected market trend freed me of many of my losing positions with profits while I was away and not attending to my account.

    So, at least I for one, am happy with that unorthodox market movement! : )
    In fact, I made quite a few "clams" playing the up & down movements of the EUR/USD all Friday night (my time)....Nice!
     
  7. Onyebuchim C. Obike

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    Never seen such a lightning spike. Results were quite confusing and conflicting. But going by what Henry Liu said about exercising patience and waiting for the employment rate figures to come out before jumping in would have saved the day.

    Honestly i think the market paid more attention to the rate of employment figures than the NFP figures which i find quite confusing.

    I think it would have been better to set pending orders in opposite directions :D
    before the outcome since predictions and forecast are no longer reliable sometimes
     
  8. carlopacot

    carlopacot Recruit

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    It just shows that fundamentals is ignored or does not mean anything when the technicals is clearly bearish.

     
  9. Mikhail

    Mikhail Recruit

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    Thanks Henry. I managed to save my short. Particularly it was difficult around 1.3640. But your advance to wait 5 minutes was helpful:) I've eaten myself but hold my week one.
     
    #9 Mikhail, Feb 6, 2011
    Last edited: Feb 6, 2011

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