US Nonfarm Payroll (NFP) Employment – May 4, 2012 – Forex Trading Strategy

nfp unemployment US Nonfarm Payroll (NFP) Employment   May 4, 2012   Forex Trading StrategyWe´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 165K Previous 120K
8:30am (NY Time) US Unemployment Rate Forecast 8.2% Previous 8.2%
Deviation: 70K

The Trade Plan
Todays NFP Employment Change release is forecasted at 165K. The Unemployment Rate is expected to remain at 8.2%. If we get a significantly lower release on the NFP (75K 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 positive NFP release (230K 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)

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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.

Please read my detailed trading strategy for this release below.

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 75K). Wait for a possible revision of the previous release number of 120K as the market usually overreacts with the Revision and chances favor that a solid trade will present itself if we dont 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 remain unchanged at 8.2%. If the Unemployment Rate were to surprise higher, were faced with an imperative decision at the time of the release.

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.

UPDATE (05/03/12 1:30pm EST)
The situation has changed a bit for the outlook of NFP, with (US) APR ISM MANUFACTURING: 54.8 V 53.0E on Monday, showing a positive outlook; then market dropped its speculation as Wednesday’s ADP report disappointed: (US) APR ADP EMPLOYMENT CHANGE: 119K V 170KE (lowest reading since Sept 2011). With today’s APR ISM NON-MANUFACTURING PMI 53.5 V 55.5E, I believe the sentiment for NFP is inline or worse than expected…

Furthermore, considering that Fed Bernanke’s stance on QE3 and the answer he gave during last press conference  indicating that 100K of job growth is still considered positive, I believe traders are going to look at 100K as the line in the sand… Here are the 3 scenarios:

  • Below 100K NFP release – Market is going to sell off on the USD based on 2 reasons, weaker economy and possible QE3 – Best go with EURUSD in my opinion.
  • Above 200K NFP release – Market is going to BUY USD based also on 2 reasons, stronger economy and no QE3 – Best go with USDJPY as BOJ is still easing.
  • Around 150K NFP release (inline) – USD is going to be bullish with some currencies and weak against others… I think SHORT EURUSD and LONG USDJPY would be the right choices, of course, pay attention to the strength meter when you trade…

Remember to follow the trade plan and take your time, if there is a typical news release that Retracement Trade is made for, it would be NFP.

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.

Thanks,

henry sig US Nonfarm Payroll (NFP) Employment   May 4, 2012   Forex Trading Strategy

Avatar of Henry Liu 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.

You can find more information about me on my Google Profile.

Comments

  1. avatarmanking says:

    Henry Liu, who the hell are you?. Never mind, i’m just curious about your analysis on NFP dated 04/05/2012. I just can’t belief that it was just the the analysis went is the same way i caught. you are definitely doctor Liu. I appreciate that so much. Please, don’t make it only on NFP but every other news and try to break it down just as you do this. Cheers

  2. avatarWilliam Mah says:

    Hi there,
    Scenario 1: If the payroll happens to be higher than the previous 120k, which is the forecasted(165k) or higher than forecasted(170k). What should I trade in EUR/USD?

    Scenario 2: What if it is higher than previous(120K) but it’s between forecasted and previous, like 140k.. What should I do in EUR/USD?

    Thank you.

    • Avatar of Henry LiuHenry Liu says:

      EURUSD likely to gain purely from yesterday’s ECB Press Conference… however, remember elections are held throughout Europe this weekend, so I will not hold EURUSD LONG trade over the weekend.

  3. avatarHazemi says:

    Hello Henry thank for your NFP analysis,can you please explain what do you mean by “if we dont get a conflicting releases between the revision and the actual release”

    • Avatar of Henry LiuHenry Liu says:

      Conflicting means when we have a weaker release like today, but a stronger upward revision, like today.
      So this means market is confused, torn between sentiments… best to stay out.

  4. avatarNicholas says:

    Hello Henry,

    I’m a junior forex trainee with a demo trading account, I thank you very much for your forex knews and right predictions because it has made confidence in me since i started training, I confident with your knews will open a live account soon because I have realised that YOU can make me have a successful trading.

    God bless you.

    Best regards

    Nicholas

  5. avatarStefano says:

    we saw a big downtrand with nzd/usd but not so consistent in aud/usd: could this happens next week with aud/usd or less than this can not go?
    as usual the 2 pairs work similary, not this time
    is aud/usd in late or for now it stops to go down?

    thanks in advance
    Stefano

    • Avatar of Henry LiuHenry Liu says:

      I think AUDUSD will follow, it’s just that we got a much more bearish news in NZ (Employment Rate) this week that helped to drive the it lower, but the overall trend remains the same for both currencies.

  6. avatarJoseph says:

    Very good analysis. If the number is better then expected I would definitely say sell euro/dollar. With all the bad fundamentals there the market seems to be waiting on good news from U.S. to finally break the range.

  7. avatarmakinde says:

    thank you very much for the analysis. please, what do you mean by strength meter

    • Avatar of Henry LiuHenry Liu says:

      In the middle column at the top of this page, do you see different currencies with numbers right under them (Like USD 4.5, EUR 5.0)? That’s Strength Meter. Please click on the link right under the meter to find out more about how to use it.

  8. avatarathfal dhany says:

    if the nfp data is good output, and the trigger is above 70k from the forecast, can we buy us dollar and hold for long trade vs another pair such as jpy

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