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Sir Pipsalot's News Trading Preview 12-03-2010 (NFP, CAD EMP, UK PMI)

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Dec 3, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    My market outlook for EUR/USD from yesterday is unchanged, so for trend insight, see my previous signal. This update is just for Friday's upcoming news.

    0428 UK Services PMI (53.2 expected) - This one is usually pretty solid with about a 50% chance of extended follow-through well after news time. Typically we'll see a 30-40 pip spike, some retracement, and a chance at an extention that could take GBP/USD on a ride for 100 pips or so.

    Spike Strategy: Try to get in within 10-20 pips max of prerelease with a 15-20 pip TP. Sometimes this will only spike 30 pips and push for further gains in the first few minutes. If you want to use a portion of your entry as an afterspike trade, feel free.

    Afterspike Strategy: Look for initial volatility within the first 2 minutes to cause a 50% retracement or provide an opportunity to get in within 15-20 pips of prerelease quickly. If the first few minutes push too hard and do not see enough volatility/retracement to get a pullback entry as described, consider shifting into a momentum following strategy looking for a pullback to the 5 minute 10 EMA and get in there.

    If it comes out higher than expected by 0.6%, GBP/USD should rally 30-40 pips.
    If it comes out lower than expected by 0.6%, GBP/USD should drop 30-40 pips.


    0700 CAD Employment Change (19.8K expected) - We typically look for at least a 15K surprise, and while somtimes that causes us to miss out on a smaller deviation that still moves the market, we also have times like last month where a 12K deviation caused a fairly shallow whipsaw with little chance for profit. Still though, if the triggers are hit, this historically is a nice trade. Typically USD/CAD will spike 40-50 pips, then work into a fairly deep retracement mode if the numbers constitute a marginal surprise. If the numbers are very extreme, USD/CAD may have trouble retracing deeply for 20-30 minutes, so consider following the momentum on the 1 minute chart.

    Spike Strategy: 40-50 pips spike is the norm, so try to get in within 15-30 pips max of prerelease and look for 15-25 pips profit on narrow triggers, and 20-40 pips profit on wide triggers. Make sure to close in the first 1-2 minutes, especially on narrower triggers since this likes to retrace deeply oftentimes.

    Afterspike Strategy: Try to let the initial action go as it's way too fast. USD/CAD oftentimes will retrace uncomfortably deep for at least 50%, but usually more like 61.8%, 78%, or even about 100%. Pick a level of retracement 50% or greater that makes sense based on the price action before and after the news and look to get in there sometime between 2 and 20 minutes after the news. If price is holding its momentum too well to retrace 50+%, consider switching to the 5 minute 10 EMA to grab 20 pips following the momentum.

    Also note, Unemployment Rate (expected at 7.9%) is also a factor.

    If it comes out at 33K or higher (13.2K above consensus), USD/CAD should drop 40-50 pips.
    If it comes out at 50K or higher (30.2K above consensus), USD/CAD should drop 50-70 pips and may extend for a 100+ pip sell off.
    If it comes out at 4K or lower (15.8 below consensus), USD/CAD should rally 40-50 pips.
    If it comes out at -11K or lower (30.8K below consensus), this would be the lowest level seen in just over a year, and USD/CAD should rally 50-70 pips initially and may extend for a 100+ pip rally

    0830 US NonFarm Payrolls and Unemployment Rate (150K and 9.6% expected) - This NFP is set to get a bit more attention than recent months given the press have moved on from their QE2 obsession and back into more of a jobs focus. There's also a higher than usual probability we'll see some revisions to prior months' numbers, so look out for that. I'll try to cover all the angles I can anticipate here, but with so many variables, a complete picture will require some thought in the moment. That being said though, NFP should be safe for a spike trade based off the regular NFP number on USD/JPY and EUR/USD as it was last month.

    Spike Strategy: USD/JPY is making a modest comeback as a news trading pair for US news, but EUR/USD is pretty solid right now and is the pair in the limelight. I'd pick one or split between the two. If the triggers are hit look for a 40-50 pip spike on USD/JPY and perhaps a bit more on EUR/USD. Once the spike is in, look quickly to Unemployment Rate and any revisions that might be coming through to see if you need to manually bail your trade quickly before you hit your TP's. If Unemployment Rate and/or revisions not only aren't hurting the spike, but are helping them, consider stretching out your TP's a bit and try sticking with the trade for about 8 minutes.

    Afterspike Strategy: Wait for all the data to come in and take a good 20 seconds or so to get a good handle on how everything's come out with NFP, Private Sector Payrolls (158K expected), Unemployment Rate and any revisions. Obviously the main factor will be NFP, but a bit unemployment rate surprise can steal the spotlight for better or worse.

    --If NFP, REVISIONS and UNEMPLOYMENT RATE come out clearly better, try to get in in the first 1-3 minutes on a volatile pullback/retracement and try a quick scalp for a few minutes... the move is likely to peak or bottom around 8-10 minutes after the release so there's a chance for some quick pips on the initial follow through.

    --If NFP, REVISIONS and UNEMPLOYMENT RATE disagree with one clearly better, and one clearly worse, first try to get a quick fundamental sense of what's the bigger deal and whether the net result is positive or negative. If the clear net result is still one sided, try the previous strategy. If it's too mixed to call, consider staying out and wait for about 15 minutes of price action to clue you in on a clear technical trade based on the order flow.

    --Ultimate Move - It's my suspicion that the ultimate move on the EUR/USD may go the opposite direction of the initial reaction due to the conflict between risk appetite influences and USD driving forces. Look for support or resistance on the EUR/USD to try trading against the initial reaction around 5-15 minutes after the news looking to TP on either a retracement or reversal.

    ***Note on Unemployment Rate*** By clearly better, I mean 0.2% or more below the 9.6% expected, while by clearly worse, I mean 0.2% or more higher than the 9.6% expected.

    If NFP comes out at 201K (51K above consensus) or higher, USD/JPY should rally 40-50 pips and EUR/USD should drop 50 pips.
    If NFP comes out at 291K (141K above consensus) or higher, USD/JPY should rally 50-70 pips and EUR/USD should drop 50-70 pips as well.
    If NFP comes out at 74K (76K below consensus) or lower, USD/JPY should fall 40-50 pips and EUR/USD should rally 50 pips.
    If NFP comes out at -1K (151K below consensus) or lower, USD/JPY should fall 50-70 pips and EUR/USD should rally 50-70 pips also.

    Unemployment Rate clearly better than expected (0.2% or more below the 9.6% expected) will add bullish pressure to USD/JPY and bearish pressure initially to EUR/USD. Clearly worse than expected (0.2% or more above the 9.6% expected) will add bearish pressure to USD/JPY and bullish pressure to EUR/USD initially.

    For those in the Profit Mongers room, I'll be running NFP while Magister Pips is running UK Services PMI and Doug is running CAD Employment.

    To our success!
    Sir Pipsalot
    sirpipsalot@profitmongers.com
     

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