venerdì 10 agosto 2012

CA Employment Change

August 10, 2012



8:30am (NY Time) CAD Employment Change Forecast 10.0K Previous 7.3K
Unemployment Rate 7.3%
DEVIATION: 25K (BUY CAD @ 30K / SELL CAD @ -20K)The

DEFINITION
“Measures the change in number of employed people during the previous month. 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.”

Trade PlanThe Canadian Employment Change report will be released at 8:30am sharp today (changed from the usual 7:00am). What I am looking for is a minimum deviation of around 25K, or the difference between the Forecast number (10.0K) versus the actual release number; if we get a positive 30K of release, we should see demand for the CAD rise, therefore we should BUY CAD against weaker currencies at the time; however, if we get a negative deviation, such as -20K or worse, we should see some weakness in the CAD, and that will be my cue to SELL CAD against stronger currencies at the time.
I´ll also pay close attention to the unemployment rate, which is expected to stay at 7.3%. As long as this number does not conflict with the Employment Changes, we should follow the direction of the news release. If we get a conflict, such as better Employment Changes but higher Unemployment Rate, then we´ll need to look at the context of the market before taking the trade.

Recommended Pairs : USDCAD.

Forecast: 6.0
Prior: 7.3
LT1 (Lower Trigger 1): -30 [BUY]
UT1 (Upper Trigger 1): +30 [SELL]

If the Canadian Employment Change comes at -24K or more negative ( -30 trigger), USD/CAD should go up by about 30 pips. If it comes out at +36K or higher ( +30 trigger), USD/CAD should go down by about 30 pips.

Based on 25 estimates, median estimate is 6.0K and the average estimate is 6.9K. The highest estimate is 20K (one vote), and then 15K (three votes), then 14K (one vote). The lowest estimate is -10K (one vote), and then -5K (one vote), and then 0 (four votes). One standard deviation is 6.8K.

Last month it came out almost as expected so no trade there.

Two months ago it came out at 7.7K vs 5K expected so it was a big no trade.

Three months ago it came out at 58.2 vs 10.0 expected, and USD/CAD spiked down by over 40 pips, followed by additional 40 pip move within first two hours. It was a really good price action.

Four months ago it came out at 82.3 vs. 10.5 expected, and USD/CAD spiked down by 40 pips within first 10 seconds, followed by additional 30 pip move within first 90 minutes.

Five months ago it came out at -2.8 vs +15 expected (-17.8 deviation) but at the same time unemployment dropped by 0.2% (therefore, they conflicted), and we saw a very weird price action. Good thing it didn't hit our trigger because it would be a losing trade.

Six months ago it came out at 2.3K vs 22K but it caused only 20 pip spike.

Seven months ago we had small deviation but still nice price action although it was a no trade for us.

Eight months ago it came out at -18.6 vs +20 expected (-38.6 deviation) and we saw a good 45 pip spike on USD/CAD.

Nine months ago it came out at -54K vs +20K expected (-74 deviation) and we saw almost 70 pip spike on USD/CAD. Amazing spike but also amazing deviation.

Ten months ago it came out at 60.9 vs 19.6 expected (+41.3 deviation). It was a really good deviation and also very good price action: about 50 pip spike on USD/CAD.

Eleven months ago it came out at -5.5 vs. 23.4 expected (-28.9 deviation) and the price action was not impressive. We can talk about 20 pip spike but the price action was very choppy.

Twelve months ago it came out at 28.4 vs 11.3 expected (+17.1 deviation) and not only USD/CAD spiked only by maybe 7 pips, but the price action actually reversed and went the other way. Total crap. This is actually the reason why this report was removed from the schedule for a while.

Keep in mind we will also have the unemployment rate coming out. If they conflict between each other, I would try exit as soon as possible.
Remember that while higher Canadian Employment is good for CAD (selling pressure on USD/CAD or EUR/CAD), higher unemployment rate is bad for CAD (buying pressure on USD/CAD or EUR/CAD). Therefore, ideally we would like to see higher employment change and lower unemployment rate, or lower employment change and higher unemployment rate.
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