US NFP (Nonfarm Payroll) Employment

 February 1, 2013

US NFP (Nonfarm Payroll) Employment

We´ll be trading the US NFP (Nonfarm Payroll) Employment Change, it is the focus news release for the week. Here´s the forecast:

8.30 am ( NY Time ) US NF Employment Forecast 160 k 

Previous 155k

8.30 am ( NY Time ) US Unemployment Rate Forecast 

7.8%

Previous 7.8%

DEVIATION : 70K ( BUY USD 230K / SELL USD 90K )

DEFINITION Measures 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 Plan Todays NFP Employment Change release is forecasted at 160K. The Unemployment Rate is expected to remain at 7.8% after the steady drop in the past few releases. If we get a significantly lower release on the NFP (90K or worse) and slightly higher Unemployment Rate (8.0% or more), I´d be looking to SELL the USD against stronger currencies as speculation for Feds to continue with QE should dominate the market. On the other hand, if we get a strong NFP release (230K or better) and the Unemployment Rate remains at or below 7.8%, USD could strengthen 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.

UPDATE – Jan 31, 2013 10:58am EST

US GDP came in at the lowest level since Q4 of 2009, but a closer look revealed that the culprit was government spending, which was -15% versus +9% prior.  The ADP NPF came in better than expected at 192K versus 164K, although the previous month was revised downward by about the same amount that beat consensus expectations. The FOMC Statement maintained a positive tone, but it did note growth paused due to weather related temporary factors, which reinforces the need for further QE as Feds vowed to continue the same $85B of purchases until thresholds of 6.5% unemployment rate and 2.5% CPI are reached.

With the NFP scheduled on the First of the month, we really don’t have that many data to go by in our prediction for NFP figure; however, I believe here are the 3 potential scenarios:

1. NFP comes in much better than expected by at least 70K.  This would be positive for risk sentiment, I would be looking to go LONG on JPY crosses, such as EURJPY, AUDJPY.
2. NFP comes inline with expectation. This would ultimately be negative for the USD as demand for risk continue to drive safe-haven currencies, such as USD, lower.  I’d be going LONG on EURUSD.
3. NFP comes in much worse than expected by at least -70K. This would be negative for the USD temporarily as traders focus on the fundamentals, and of course, speculators will be looking for QE3/4 to continue, thus feeding into the view for more weakness in the USD… Although we may see some temporary USD strength due to safe-haven flows, it should reverse soon and provide us with a good entry by not having to deal with the spikes in the confusion as risk sentiment and fundamental traders fight it out… I’d be looking to go LONG on EURUSD.

As you can see, I am not in the market for LONG USD, as I don’t see any potential scenario that would produce persistent USD strength.

NFP Trading Strategy Let´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 90K). Wait for a possible revision of the previous release number of 155K, and market usually overreacts with the Revision and chances favor that a solid trade will present itself if we don’t 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 be at 7.8%. If the Unemployment Rate were to surprise higher, we’ll have to make a decision based on the market sentiment coming into this release… Of course, if Unemployment rate were to fall below 7.6%, then we should see a surge in risk appetite as traders very much like to see lower jobless rates.

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.

EUR/USD - Euro / US Dollar

Resistances : Weekly 1.373 ; Daily 1.3675 ; Hourly 1.364

Supports : Weekly 1.3535 ; Daily 1.357 ; Hourly 1.36

USD/JPY - US Dollar / Yen

Resistances : Weekly 93 ; Daily 92.5 ; Hourly 92.3

Supports : Weekly 91.05 ; Daily 91.65 ; Hourly 92.1

the BEST OF BOOKS

Expert Advisor Programming: Creating Automated Trading Systems in MQL for MetaTrader 4 - Andrew R. Young - EUR 22,58


Andrew Young is a trading system programmer and entrepreneur, and the founder of Easy Expert Forex, an online MQL programming service. He currently resides in Nashville, TN.

Finally, the first comprehensive guide to MQL programming is here! Expert Advisor Programming guides you through the process of developing robust automated forex trading systems for the popular MetaTrader 4 platform. In this book, the author draws on several years of experience coding hundreds of expert advisors for retail traders worldwide. You'll learn how to program these common trading tasks, and much more: - Place market, stop and limit orders. - Accurately calculate stop loss and take profit prices. - Calculate lot size based on risk. - Add flexible trailing stops to your orders. - Count, modify and close multiple orders at once. - Verify trading conditions using indicators and price data. - Create flexible and reusable source code functions. - Add advanced features such as timers, email alerts and Martingale lot sizing. - Avoid common trading errors and easily troubleshoot your programs. - Adjustments for fractional pip brokers and FIFO. - Plus, learn how to create your own custom indicators and scripts! Whether you're a beginner or an experienced programmer, Expert Advisor Programming can help you realize your automated trading ideas in the shortest amount of time. This book features dozens of code examples with detailed explanations, fully-functioning example programs, and reusable functions that you can use in your own expert advisors!