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 160K Previous 39K
8:30am (NY Time) US Unemployment Rate Forecast 9.6% Previous 9.6%
ACTION: 230K BUY USDJPY / 90K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the expectation ranges from +95K to +250K, counting on an increase in the private sector payrolls estimated at +155K. Market has shifted up its sentiment towards private sector jobs significantly after Wednesday's ADP report of 297K versus 100K of expectation...
The Unemployment Rate will be another important figure today as it is expected to improve slightly from 9.8% to 9.7%. I believe that in the event we get a conflict of releases, such as a better NFP figure but worse Unemployment Rate, market will react more to the Unemployment rate if it’s above the psychological 10.0% level.
Considering both ISM Manufacturing and Non-Manufacturing PMI's (forecast), it is very likely that market is expecting a better than expected release, especially when you consider the blow-out release for Wednesday's ADP report.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (90K 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 (+230K or better) and the Unemployment Rate remains at 9.7% or better, JPY should weaken immediately as USD/JPY may recover and move above 84 to 85 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 limited liquidity ever since the beginning of the week, and if you were trading during the last two weeks of 2010, you'd know how speculators took advantage of the liquidity condition and pushed USD to all time lows against several majors... Even though we saw some consolidation during the past few sessions, many traders are still waiting on the NFP for confirmation before committing to a longer-term trade.
However, the general market sentiment should be leaning towards a strong number, as both ISM PMI's are suggesting, not mentioning the surprise better than expected ADP report (297K) on Wednesday.
Important Note: I believe the general market will be focused more on the Private Sector jobs, which are expected at a +155K. If we get a strong number, let's say in the range of 200K+, even if the NFP headline is inline or even 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 (230K or 90K). We’ll wait for a possible revision to the previous release number, 1which is 151K, 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 9.7% from 9.8% 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. As long as we don’t go over the 10.0% psychological level, I think traders may not focus exclusively on this release. However, if we do get over the 10.0% level, I’d probably be looking for a SELL on USD/JPY or other JPY crosses and Yen should strengthen.
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 1.3000 and AUDUSD just below the 1.0000 level, on a stronger NFP release, we could see significant losses in both pairs as the next psychological supports for them are at least 200+ pips away.
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 160K Previous 39K
8:30am (NY Time) US Unemployment Rate Forecast 9.6% Previous 9.6%
ACTION: 230K BUY USDJPY / 90K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the expectation ranges from +95K to +250K, counting on an increase in the private sector payrolls estimated at +155K. Market has shifted up its sentiment towards private sector jobs significantly after Wednesday's ADP report of 297K versus 100K of expectation...
The Unemployment Rate will be another important figure today as it is expected to improve slightly from 9.8% to 9.7%. I believe that in the event we get a conflict of releases, such as a better NFP figure but worse Unemployment Rate, market will react more to the Unemployment rate if it’s above the psychological 10.0% level.
Considering both ISM Manufacturing and Non-Manufacturing PMI's (forecast), it is very likely that market is expecting a better than expected release, especially when you consider the blow-out release for Wednesday's ADP report.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (90K 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 (+230K or better) and the Unemployment Rate remains at 9.7% or better, JPY should weaken immediately as USD/JPY may recover and move above 84 to 85 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 limited liquidity ever since the beginning of the week, and if you were trading during the last two weeks of 2010, you'd know how speculators took advantage of the liquidity condition and pushed USD to all time lows against several majors... Even though we saw some consolidation during the past few sessions, many traders are still waiting on the NFP for confirmation before committing to a longer-term trade.
However, the general market sentiment should be leaning towards a strong number, as both ISM PMI's are suggesting, not mentioning the surprise better than expected ADP report (297K) on Wednesday.
Important Note: I believe the general market will be focused more on the Private Sector jobs, which are expected at a +155K. If we get a strong number, let's say in the range of 200K+, even if the NFP headline is inline or even 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 (230K or 90K). We’ll wait for a possible revision to the previous release number, 1which is 151K, 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 9.7% from 9.8% 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. As long as we don’t go over the 10.0% psychological level, I think traders may not focus exclusively on this release. However, if we do get over the 10.0% level, I’d probably be looking for a SELL on USD/JPY or other JPY crosses and Yen should strengthen.
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 1.3000 and AUDUSD just below the 1.0000 level, on a stronger NFP release, we could see significant losses in both pairs as the next psychological supports for them are at least 200+ pips away.
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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