Forex Signal (Wed August 4, 2010 8:15am EST NY Time) US ADP NFP Employment Change

[Henry Liu]

ADP or Automatic Data Processing (NASDAQ:ADP) is releasing it’s own estimate for the private sectors of NFP (Nonfarm Payroll). This is high impact release and it’s followed by currency traders as they look for hints on Friday's NFP official release. Here’s the forecast:

8:15am NY Time US ADP NFP Change Forecast 38K Previous 13K
ACTION: USD/JPY BUY 90K SELL -10K

The Trade Plan
I usually don’t trade the ADP figure as I use this release for future market trend references, and I assume that most investors are likely to do the same, but if the deviation of 50K is actually hit, true speculators will probably have not problem jumping into the market, and this will undoubtedly change market perception on Friday’s NFP release; therefore it is best to be around your computer during the release time rather than finding out what happened hours later and perhaps missed the entire movement.

With the above being said, if we get 90K or better release, I'd be looking to BUY USD/JPY; if we get a -10K or worse, then I'd be looking to SELL USD/JPY for yet another day...

I'd be doing Retracement Trade after the release, for more information:
Henry's news trading methods.

The Market
With NFP forecasted at -75K, this ADP release may add to that negative sentiment and push JPY to new levels (retest the 85.00 on USDJPY, taking another shot at 14 year low levels) if we get a disappointing release. As a matter of fact, anything short of a stellar release, market will probably not be ready to steer away from the general weakness in the USD that we've seen in the past few weeks.

With USD trading weaker against all other majors, the general sentiment is dissociating USD's safe-haven status against its price action as market is both strong on JPY and weak on USD. The direction for USD in the next 30 days may be very well determined by the NFP release on Friday, making this ADP release a first relevant look into the future...

Additional Thoughts
The ADP NFP Employment Release is aways considered as a high impact release because ADP is the largest private payroll processing provider in the U.S., traders in general pay more attention to this release, especially during NFP week. ADP usually releases its version of Non-Farm Payroll numbers before the actual NFP based on it’s proprietary private payroll data.

If we are paying attention to the ADP release, we should of course pay attention at 7:30am on Challenger Job Cut report, which counts all major layoffs for the month of July. This number may be a bit higher as U.S. Census Bureau is expected to drop about 144K temporary workers, and that would be counted in this report. We may see some market reaction prior to this release...

And while we are on a roll, let's remember the Monster.com Employment Index on Thursday morning at 6:00am, which will give us another view of the upcoming NFP release on Friday.

Pre-news Consideration
ADP is expected to show a modest gain of 38K, but with Census hiring skewing the overall picture, private data such as the ADP may not move the market much... However, if we do get a strong release, we could expect some change in the pre-news expectation for NFP on Friday.

There should not be much pre-news trading opportunities for this release. General market trend is still for weaker USD. Best currency to go against USD is GBP. I'd expect to see the general market remain in its current trend prior to the release.

Historical Chart & Data Of ADP NFP Employment Report


Thanks,

 

[Arjuna]

Risk Appetite vs. Risk Aversion

Hi Henry ~

Someone from the ForexTradeAlarms referred my question to you,
saying something to the effect that you might know more about it
than the one who referred you. So here it is:

Recently the question of how reports affect risk appetite and risk aversion occurred to me. How can we as traders know if a report will affect risk appetite or risk aversion? Sometimes it appears that when a report comes out and it's U.S. Dollar positive, instead of the dollar reacting positively the stock market takes off, and vice-versa; i.e., when the report is apparently one that would cause greater risk appetite instead causes the U.S. Dollar to rally. Is there any method to the madness?

Trading the news is really not my style, but it helps to know how one or another report might play out in the forex arena. Time after time when any given report comes out, even though it should perhaps have a positive effect on the currency in question, instead has a negative effect...or, vice-versa.

Can you help me better understand the dynamics behind risk aversion and risk appetite, especially when it comes to the U. S. Dollar Index?

Any support you can provide is greatly appreciated.

 

[RMSTrader]

Henry -

I wanted to tell you much I appreciate your reports. You are obviously quite capable and knowledgeable. I am starting to use your info more and more and find it quite accurate.

Please keep up the good work, sir!

 

[rogerdodger]

A simpler version of your announcements

Hi Henry
I sometimes have difficulty following your posts.

For me there is too much detail and they are not always easy to read.
While your fundamental analysis is excellent I think it should be seperated into two seperate posts. One with your detailed fundamentals, retracements etc and one with a summary of key numbers to look out for with the release.

Have you had this feedback from others?

 

[kennyj]

trading thus news

i will be looking forward to trading this news as soon as i get the actual change in ADP NFP.... Thanks liu

 

[riaz khan]

following and reading you i lose every single penny u advice in the eary report that AUD will fall down so i sell but gone up and i lose now in this report i bought USD and lose the remaining amount while i earned in those entries where i donot follow you. please i am disappointed to read these releases. sorry