Henry Liu
Former FPA Special Consultant
- Messages
- 473
We’ll be trading the US NFP (Nonfarm Payroll) Employment Changes, it is probably the second most volatile news release for the week (FOMC being the first). Here’s the forecast:
8:30am (NY Time) US NFP Forecast 60K Previous -95K
8:30am (NY Time) US Unemployment Rate Forecast 9.6% Previous 9.6%
ACTION: 110K BUY USDJPY / -10K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the expectation ranges from -30K to +90K, counting on an increase in the private sector payrolls estimated at +80K versus the 64K release in September, and there shouldn't be any more lingering Census job cuts in the public sector as most temporary census jobs have been terminated the month before. Market has shifted up its sentiment towards private sector jobs slightly after Wednesday's ADP report of 43K versus +21K of expectation... ADP's September release was also revised higher to -2K from -39K...
The Unemployment Rate will be another important figure today as it is expected to stay unchanged at 9.6% from 9.6% in September. 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, it is very likely that market is expecting a better than expected release, especially when you consider the employment components of both indeces.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (-10K or worse) and Unemployment Rate (9.6% 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 (+110K or better) and the Unemployment Rate remains at 9.6% or better, JPY should weaken immediately as USD/JPY may recover and move above 82 throughout the trading session, and BOJ may just intervene taking advantage of a positive US data... 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
If you remember what took place during last NFP release, market reacted with risk aversion sentiment and USD pairs such as EURUSD and GBPUSD retraced from their spike highs within the first 30 minutes, then went on to retest the highs again...
We'll probably see similar reaction if we get a negative release, but because we won't have to deal with another high impact US news later on, market may stay in the same trend and push USD to new lows all the way until closing at 4:00pm
Important Note: I believe the general market will be focused more on the Private Sector jobs, which are expected at a +80K, and with recent ADP data printing out a -43K vs 21KE, we could see some optimism in the market for USD even prior to the release...
Therefore, I'd advice everyone to focus on both headline NFP and Private Sector job growth. If we get around 100K+ in the private sector growth, I think market would really take that as a positive sign for the U.S. economy.
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 (-110K or -10K). We’ll wait for a possible revision to the previous release number, 1which is -95K, 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 9.6% from 9.6% 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 USD/JPY sitting close at the psychological level of 80.00, with throwing distance of a new multi-decade low level at 79.75, it is going to take a very strong momentum to break this level. With BOJ verbally making the 80.00 as the new line of defense, at break of this level we should see some significant gains in the JPY.
Another important factor is the QE 2 plan, which was the focus and primary reason for USD's decline in the past 48 hours. Word on the street is Open Season on USD. With expected worldwide inflation as result of QE 2, commodities are looking best against USD as traders load up on future contracts.
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 60K Previous -95K
8:30am (NY Time) US Unemployment Rate Forecast 9.6% Previous 9.6%
ACTION: 110K BUY USDJPY / -10K BUY EURUSD
The Trade Plan
With today’s release, as per a special report by Bloomberg, the expectation ranges from -30K to +90K, counting on an increase in the private sector payrolls estimated at +80K versus the 64K release in September, and there shouldn't be any more lingering Census job cuts in the public sector as most temporary census jobs have been terminated the month before. Market has shifted up its sentiment towards private sector jobs slightly after Wednesday's ADP report of 43K versus +21K of expectation... ADP's September release was also revised higher to -2K from -39K...
The Unemployment Rate will be another important figure today as it is expected to stay unchanged at 9.6% from 9.6% in September. 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, it is very likely that market is expecting a better than expected release, especially when you consider the employment components of both indeces.
The Plan
Here's the general plan: If we get a significantly lower release on the NFP (-10K or worse) and Unemployment Rate (9.6% 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 (+110K or better) and the Unemployment Rate remains at 9.6% or better, JPY should weaken immediately as USD/JPY may recover and move above 82 throughout the trading session, and BOJ may just intervene taking advantage of a positive US data... 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
If you remember what took place during last NFP release, market reacted with risk aversion sentiment and USD pairs such as EURUSD and GBPUSD retraced from their spike highs within the first 30 minutes, then went on to retest the highs again...
We'll probably see similar reaction if we get a negative release, but because we won't have to deal with another high impact US news later on, market may stay in the same trend and push USD to new lows all the way until closing at 4:00pm
Important Note: I believe the general market will be focused more on the Private Sector jobs, which are expected at a +80K, and with recent ADP data printing out a -43K vs 21KE, we could see some optimism in the market for USD even prior to the release...
Therefore, I'd advice everyone to focus on both headline NFP and Private Sector job growth. If we get around 100K+ in the private sector growth, I think market would really take that as a positive sign for the U.S. economy.
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 (-110K or -10K). We’ll wait for a possible revision to the previous release number, 1which is -95K, 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 9.6% from 9.6% 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 USD/JPY sitting close at the psychological level of 80.00, with throwing distance of a new multi-decade low level at 79.75, it is going to take a very strong momentum to break this level. With BOJ verbally making the 80.00 as the new line of defense, at break of this level we should see some significant gains in the JPY.
Another important factor is the QE 2 plan, which was the focus and primary reason for USD's decline in the past 48 hours. Word on the street is Open Season on USD. With expected worldwide inflation as result of QE 2, commodities are looking best against USD as traders load up on future contracts.
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,
Last edited by a moderator:
