8:30m (NY Time) US NFP (Nonfarm Payroll) Changes Forecast -3K Previous -11K (Unemployment Rate 10.1%)
ACTION: EUR/USD BUY -73K SELL 50K
We’ll focus on the NFP release today, which is expected at -3K with a previous release of -11K; if you remember what happened last NFP, you’d know that the last release surprised the market and revived the end of the year USD rally and caused a major trend change by the much better than expected release of -11K from an expectation of -120K. However, for USD to maintain its bullish rally well into 2010, today’s release must be either inline with expectations or in the positive territory.
It’s also important to note the psychological factor of a positive release in NFP. It will not only send out a message that it’s time the US economy starts to create jobs but also confirm the recovery and shatter concerns of a double-dip recession… this could essentially cause a major shift in monetary reserves as USD is not only considered as safe investment but also attractive.
Now let’s talk about how to trade this release: We’ll wait for the numbers to come out, but we will not take any trade YET, even if we get our tradable figures (-73K or 50K). We’ll wait for a possible revision to the previous release number, which is -11K, as the market usually overreacts with the Revision; chances favor that this trade to work out if we do not get conflicting releases between the revision and the actual release.
Then the next step is to wait for the Unemployment Rate, which is at 10.1%. If the Unemployment Rate were to surprise higher, we’d have to make an executive decision at the time of the release and see what the primary focus of traders is. As long as we don’t surprise the 10.5%, I think the market will probably pay more attention to the NFP release.
One last thing… I have adjusted the trigger today because I feel that if we get a positive 50K of release, it should be enough to drive pro-USD sentiment… but to SELL USD, I think we need the whole -70K of deviation. Thus the BUY trigger is -73K, and the SELL trigger is 50K.
Of course, as usual, I will trade this release live and post the recording back in this blog. Therefore, stay tuned.
“Measures the change in the 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, is a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.”