U.S. Nonfarm Payroll (NFP) Could Suprise To The Upside…


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US BLS (Bureau Of Labor Statistics) will release its Nonfarm Payroll Employment Report on Friday, and it is probably the single most important NFP release for the new quarter as traders look for signs of improvement after the sobering statement from the Feds two weeks ago that prompted the launch QE3:

The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions…

This release will, of course, justify QE3 if we get a below 100K release, and in the process drive USD weaker as more Fed stimulus is expected.  However, if we get a stronger than 150K release, although it may not mean that the Feds will pull the plug as the FOMC statement went as far as saying that they will keep the policy accommondative even after economy starts to recover, it will still be a USD negative news, or a risk positive news as regardless of the Nonfarm Payroll release, market will expect more stimuli from the Feds… the difference will be either a weaker USD (100K or less release) or a weak USD (150K or more)…

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Of course, the immediate market reaction will probably follow the news, especially with the EURUSD pair, as strong Nonfarm Payroll will probably drive the pair lower, but ultimately, USD should weaken.

Now that we’ve gotten that out of the way, let’s take a look at some of the data releases so far:

(US) Sept ADP Employment Change: 162K v 140Ke

  • Prior ADP Employment Change (Aug) revised lower from 201K to 189K
  • July ADP revised lower to 156K from 173K

(US) SEPT ISM NON-MANUFACTURING: 55.1 V 53.4E (highest since March 2012)

  • Prices Paid: 68.1 v 64.3 prior (highest since Feb 2012)
  • New Orders: 57.7 v 53.7 prior (highest new orders reading since March 2012)
  • Employment: 51.1 v 53.8 prior
  • Inventories: 48.8 v 52.5 prior

(US) SEP ISM MANUFACTURING: 51.5 V 49.8E (first time above 50 since May 2012);

  • ISM PRICES PAID: 58.0 V 55.8E (highest since April 2012)
  • New Orders Index: 52.3 v 47.1 prior (first time above 50 since May 2012)
  • Production index: 49.5 v 47.2 prior
  • Employment Index: 54.7 v 51.6 prior
  • Inventories index: 50.5 v 53.0 prior
  • Spread (new orders to inventories): 1.8 v -5.9 prior

All of these numbers are suggesting an inline or better than expected Nonfarm Payroll release on Friday, and as concluded above, USD is expected to weaken on risk sentiments and further QE3 by the Feds.  I believe we may see JPY taking a big hit as a result, the reason being is that both USD and JPY are safe-haven currencies, a better than expected US news may bring some fundamental buyers into the mix, but a strong risk appetite sentiment should drive JPY lower, and without the fundamental factor, JPY is clearly the best choice to SELL; therefore I would recommend to go LONG on EURJPY (101.40 – now at the time of this article) or LONG on GBPJPY (126.20).


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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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