Primary currency pair: USD/JPY
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 92K Previous 69K
8:30am (NY Time) US Unemployment Rate Forecast 8.2% Previous 8.2%
Deviation: 70K (BUY USD 160K / SELL USD 30K)
The Trade PlanTodays NFP Employment Change release is forecasted at 92K. The Unemployment Rate is expected to remain at 8.2%. If we get a significantly lower release on the NFP (30K 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 strong NFP release (160K 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.
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.
If US Non-Farm Payroll Employment Change comes out at +35 or less ( -65 trigger), USD/JPY should go down by about 30 pips. If it comes out at +165K or better ( +65.0 trigger), USD/JPY should go up by about 30 pips.
Based on 84 estimates, median estimate is 100K while the average estimate is 98. The highest estimate is 165K (one estimate), and then second highest is 150K (one vote), and then 140K, 135K, and 130K (two votes each). The lowest estimate is 35K (one estimate), and then 45K and 50K (one vote each), and then 60K and 65K (one estimate each). One standard deviation is +/- 24K.
Also, based on 80 estimates, it is expected the unemployment rate will come out at 8.2% (median is 8.2% and also the average estimate is 8.2%). Six economists expect unemployment rate at 8.3%, and seven surveyed economists expect unemployment rate to come out at 8.1%. Remaining 67 economists expect it to come out at 8.2%. One standard deviation is just +/- 0.0%.
We will also have Canadian Employment Change coming out at the same time, and if I had to choose between the two, I would prefer to trade Canadian Employment Change this time. While Non-Farm Payroll is capable to make some good pips again after a few months of non-performance, we see quite frequently conflicts between Non-Farm Payroll Employment Change and Unemployment rate. That may be deadly in some extreme cases. Historically I always made more money on the Canadian Employment Change than Non-Farm Payroll.
While this is the very first time we see both of them coming out at the same time, I think it's relatively safe to trade Non-Farm Payroll on USD/JPY.
Unfortunately, I cannot predict if we are going to have a conflict between Employment Change and Unemployment so only what I can do is recommend a bit bigger triggers and also advice to pay really close attention to the unemployment rate. If you see a conflict, exit immediately.
As always, there is also a possibility of a nice conflict with the Revision number.
Please remember that a deviation of 0.2 on the unemployment number can move USD/JPY on its own. A positive deviation of unemployment rate is bad for USD because it means higher unemployment. However, a positive deviation on the employment change or revision is good for USD because it means more people got jobs.
Last month Non-Farm Payroll Employment change came out at 69K vs 150K expected, and unemployment rate 8.2% vs 8.1% expected and we saw about 40 pip spike on USD/JPY.
Two months ago employment change come out at 115K vs 160K expected but unemployment rate came out at 8.1% vs. 8.2% expected so because of that conflict we had quite choppy price action.
Three months ago we actually had a great spike. It came out at 120K vs. 205K expected and unemployment rate 8.2% vs 8.3% expected (so conflicting again). Still, USD/JPY spiked down by about 80 pips in just first 10 seconds, followed by additional big drop.
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