May 4, 2012 – Forex Trading Strategy
We´ll be trading the US NFP (Nonfarm Payroll) Employment Change, it is the focus
news release for the week. Here´s the forecast:
8:30am (NY Time) US NF Employment Forecast 165K Previous 120K
8:30am (NY Time) US Unemployment Rate Forecast 8.2% Previous 8.2%
Deviation: 70K
DEFINITIONMeasures 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.
The Trade PlanTodays NFP Employment Change release is forecasted at 165K. The Unemployment Rate is expected to remain at 8.2%. If we get a significantly lower release on the NFP (75K or worse) and slightly higher Unemployment Rate (8.3% or more), I´d be looking to SELL the USD against stronger currencies. On the other hand, if we get a positive NFP release (230K or better) and the Unemployment Rate remains at or below 8.2%, USD should strengthen immediately and I would BUY USD against other weaker currencies (use CSM or recommended pairs above)
If we get a conflicting release, then well wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, well get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you´ll get a much clearer view.
NFP Trading StrategyLet´s talk about how to trade this release: We´ll wait for the numbers to come out but continue to hold on a trade, Even if we get our tradable figures (230K to 75K). Wait for a possible revision of the previous release number of 120K as the market usually overreacts with the Revision and chances favor that a solid trade will present itself if we dont get a 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 remain unchanged at 8.2%. If the Unemployment Rate were to surprise higher, were faced with an imperative decision at the time of the release.
After all of the numbers have been released, wait for the market to push and wait patiently 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 a much better entry.
Here are the 3 scenarios:
8:30am (NY Time) US NF Employment Forecast 165K Previous 120K
8:30am (NY Time) US Unemployment Rate Forecast 8.2% Previous 8.2%
Deviation: 70K
DEFINITIONMeasures 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.
The Trade PlanTodays NFP Employment Change release is forecasted at 165K. The Unemployment Rate is expected to remain at 8.2%. If we get a significantly lower release on the NFP (75K or worse) and slightly higher Unemployment Rate (8.3% or more), I´d be looking to SELL the USD against stronger currencies. On the other hand, if we get a positive NFP release (230K or better) and the Unemployment Rate remains at or below 8.2%, USD should strengthen immediately and I would BUY USD against other weaker currencies (use CSM or recommended pairs above)
If we get a conflicting release, then well wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, well get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you´ll get a much clearer view.
NFP Trading StrategyLet´s talk about how to trade this release: We´ll wait for the numbers to come out but continue to hold on a trade, Even if we get our tradable figures (230K to 75K). Wait for a possible revision of the previous release number of 120K as the market usually overreacts with the Revision and chances favor that a solid trade will present itself if we dont get a 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 remain unchanged at 8.2%. If the Unemployment Rate were to surprise higher, were faced with an imperative decision at the time of the release.
After all of the numbers have been released, wait for the market to push and wait patiently 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 a much better entry.
Here are the 3 scenarios:
- Below 100K NFP release – Market is going to sell off on the USD based on 2 reasons, weaker economy and possible QE3 – Best go with EURUSD in my opinion.
- Above 200K NFP release – Market is going to BUY USD based also on 2 reasons, stronger economy and no QE3 – Best go with USDJPY as BOJ is still easing.
- Around 150K NFP release (inline) – USD is going to be bullish with some currencies and weak against others… I think SHORT EURUSD and LONG USDJPY would be the right choices, of
- course, pay attention to the strength meter when you trade…
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