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 36K
8:30am (NY Time) US Unemployment Rate Forecast 9.1% Previous 9.0%
ACTION: 250K BUY USDJPY / 100K 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 +200K. 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 9.1% to 9.0%. If you remember, last two Unemployment Rate produced a combined 0.8% reduction, which is probably one of the sharpest reduction in the Unemployment Rate in decades...
Therefore, even if we get 9.3% of Unemployment Rate, market would probably not react with extreme volatility... However, if the Unemployment rate is back above the psychological 9.5% level, then expect some USD sell-offs...
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (100K or worse) and Unemployment Rate (9.3% 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 (+250K or better) and the Unemployment Rate remains at 9.1% 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 is currently optimistic from yesterday's ECB Trichet's Press Conference as Trichet stated that current ECB monetary policy does not rule out April Rate Hike, although there are no pre-commitment of interest rate... This new tone has added demand in the EUR immediately and pushed most EUR crosses up... However, we are seeing USD still remaining strong against other majors because there is an equally optimistic view with the NFP release today.
With all recent economic gauges pointing for a much better NFP release, including the ADP report figure of +217K, there aren't much argument for a negative surprise... Therefore, I do believe are likely to get an inline or slightly better than expectation report.
Of course BLS also stated the previous release being incorrect, we could also see a sharp upward revision that will add more momentum for USD rally. If the Unemployment Rate is able to remain in the low 9.0%, I believe USD will make a strong comeback against all other majors, with possible exception of the Euro (due to Trichet).
However, I'd recommend everyone to follow the NFP strategy below, because no matter how optimistic the NFP looks prenews, 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 100K). We’ll wait for a possible revision to the previous release number, which is 36K, 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 9.1% from 9.0% 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 (0.5%) was due to seasonal factors, therefore market should not react much even if we get 9.3 or so... As long as we don’t go over the 9.5% 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
We do have several choices to go LONG on USD and I believe USDJPY and USDCHF may provide some of the best movements as both JPY and CHF are also safe-haven currencies in the same class as the 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 36K
8:30am (NY Time) US Unemployment Rate Forecast 9.1% Previous 9.0%
ACTION: 250K BUY USDJPY / 100K 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 +200K. 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 9.1% to 9.0%. If you remember, last two Unemployment Rate produced a combined 0.8% reduction, which is probably one of the sharpest reduction in the Unemployment Rate in decades...
Therefore, even if we get 9.3% of Unemployment Rate, market would probably not react with extreme volatility... However, if the Unemployment rate is back above the psychological 9.5% level, then expect some USD sell-offs...
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (100K or worse) and Unemployment Rate (9.3% 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 (+250K or better) and the Unemployment Rate remains at 9.1% 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 is currently optimistic from yesterday's ECB Trichet's Press Conference as Trichet stated that current ECB monetary policy does not rule out April Rate Hike, although there are no pre-commitment of interest rate... This new tone has added demand in the EUR immediately and pushed most EUR crosses up... However, we are seeing USD still remaining strong against other majors because there is an equally optimistic view with the NFP release today.
With all recent economic gauges pointing for a much better NFP release, including the ADP report figure of +217K, there aren't much argument for a negative surprise... Therefore, I do believe are likely to get an inline or slightly better than expectation report.
Of course BLS also stated the previous release being incorrect, we could also see a sharp upward revision that will add more momentum for USD rally. If the Unemployment Rate is able to remain in the low 9.0%, I believe USD will make a strong comeback against all other majors, with possible exception of the Euro (due to Trichet).
However, I'd recommend everyone to follow the NFP strategy below, because no matter how optimistic the NFP looks prenews, 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 100K). We’ll wait for a possible revision to the previous release number, which is 36K, 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 9.1% from 9.0% 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 (0.5%) was due to seasonal factors, therefore market should not react much even if we get 9.3 or so... As long as we don’t go over the 9.5% 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
We do have several choices to go LONG on USD and I believe USDJPY and USDCHF may provide some of the best movements as both JPY and CHF are also safe-haven currencies in the same class as the 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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Keep up good work. I finally started making consistent money on news using Your strategies.
