US ADP NFP Employment

October 3, 2012

ADP or Automatic Data Processing (NASDAQ:ADP) is releasing it´s own estimate for the private sectors of NFP (Nonfarm Payroll). This is a high impact release and it´s followed by currency traders as they look for hints on Friday´s NFP official release. Here´s the forecast:

8:15am NY Time US ADP NFP Change Forecast 150K Previous 201K
Deviation: 50K (BUY USD 200K / SELL USD 100K) 

Definition:ADP Employment report was developed and is maintained by Macroeconomic Advisers, LLC. It is a measure of employment derived from an anonymous subset of roughly 500,000 U.S. business clients. During 2011, this subset averaged about 344,000 U.S. business clients and represented over 21 million U.S. employees working in all private industrial sectors. The ADP NFP report is a monthly estimate of private nonfarm employment among companies in the United States with 1-49 employees and is a subset of the ADP National Employment Report. The data for both reports is collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. Due to this processing, this subset is modified to make it indicative of national employment levels; therefore, the resulting employment changes computed for the ADP National Employment Report are not representative of changes in ADP’s total base of U.S. business clients. (Taken from official ADPEmploymentReport.com…)


The Trade PlanI usually don´t trade this release but I use it for future trend references. However, if the deviation of 50K is actually hit, the market probably wont have a problem pushing it, and this will undoubtedly change market perception for the NFP release; therefore its best to be around your computer during the release time rather than find out what happened hours later and potentially miss the entire movement.
With the above being said, we´ll be looking for a deviation of 50K, so if we get 200K or better release, I´d be looking to BUY USD against the Weakest currency based on the strength meter; if we get a 100K or worse, then I´d be looking to SELL USD against the Strongest currency based on the meter…

Recommended Pairs : EURUSD.

EUR/USD - Euro / US Dollar

Resistances : Weekly 1.3045 ; Daily 1.301 ; Hourly 1.2955

Supports :     Weekly 1.2805 ; Daily 1.2835 ; Hourly 1.2875

UK Services PMI

October 3, 2012

We´ll be trading the UK Services Purchasing Manager Index today at 4:28am (NY Time). This is a leading indicator similar to the Manufacturing PMI that was released early this week, here´s the forecast:
4:28am (NY Time) UK Services PMI Forecast 53.0 Previous 53.7
Deviation: 2.5 ~ 3.0 (BUY GBP 55.5 / SELL GBP 50.0)

DEFINITION:
The Chartered Institute of Purchasing and Supply (CIPS) Services Purchasing Manager´s Index (PMI) measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation´s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company´s performance, which can be a leading indicator of overall economic performance

The Services PMI is tradable with a minimum deviation of 2.5 between the forecast and the actual release. If we get at least 55.5 or better, we could see some demand in the GBP and we will consider BUYING GBP against weaker currencies. If we get a 50.0 or lower, GBP could weaken and we should look to SELL GBP against stronger currencies

Recommended Pairs : GBPCHF , GBPUSD

Resistances : Weekly 1.619 ; Daily 1.6165 ; Hourly 1.6135

Supports :     Weekly 1.6015 ; Daily 1.6075 ; Hourly 1.61 

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US ISM Manufacturing PMI

October 1, 2012

ISM or Institute for Supply Management is releasing its PMI (Purchasing Manager Index) today. As a leading indicator, traders generally pay attention to this report for hints of economic trend.
Here´s the forecast:
10:00am NY Time US ISM Manufacturing PMI Forecast 50.0 Previous 49.6
DEVIATION: 2.0 (BUY USD 52.0 / SELL USD 48.0)

DEFINITION:The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation´s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company´s performance, which can be a leading indicator of overall economic performance.


Trade PlanWe´ll be looking for around 2.0 points of deviation for this trade. If a 48.0 or better number is released, we could see some USD weakness, thererefore SELL USD. If the opposite is true, or 52.0 figure is released, expect to see stronger USD in the short term, therefore we should BUY USD.
If our tradable releases are reached, there is a good expectation of 50 pips of market movement within the next 60 minutes on USD.

Recommended Pairs : EURUSD, USDJPY

USD/JPY - US Dollar / Yen

Resistances : Weekly 78.85 ; Daily 78.45 ; Hourly 78.1

Supports :      Weekly 77.1 ; Daily 77.45 ; Hourly 77.8

 

UK Manufacturing PMI

October 1, 2012

UK Manufacturing PMI

Manufacturing PMI is a leading indicator that is usually released early in the month. Traders pay attention to this release for surprises as this survey may help to shape the general trend of the currency for the rest of the month. Here is the forecast:
4:28am (NY Time) UK Manufacturing PMI Forecast 49.5 Previous 49.5DEVIATION: 2.5 (BUY GBP 52.0 / SELL GBP 47.0)

DEFINITION“UK Manufacturing PMI is a survey of purchasing managers in the manufacturing sector on various economic activities, including inventory, employment, orders, etc… A higher than 50 reading means expansion, or a less than 50 reading means contraction.”


The Trade PlanWe´re looking for a tradable deviation (or the difference between the forecast figure and the actual release figure) of 2.5. Since this is a leading indicator and its impact may hint the future trend of other economic indicators (such as inventory, employment, retail sales, etc..), the market usually reacts to this release with volatility if we get our deviation.
We´ll be looking to BUY GBP if we get a 52.0 or better, or looking to SELL GBP if we get a 47.0 or worse.

Recommended Pairs: GBPUSD.

 Resistances : Weekly 1.6265 ; Daily 1.621 ; Hourly 1.6165

Supports :      Weekly  1.6065 ; Daily 1.6085; Hourly 1.611

 

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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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