NFP Day, The Do’s And More Importantly The Dont’s…

Sep 6 • Morning Roll Call • 2550 Views • Comments Off on NFP Day, The Do’s And More Importantly The Dont’s…

jobsThe best piece of advice we’ve come across with regards to trading FX during the publication of the NFP jobs number is don’t, “don’t trade it”. Actually that’s not the whole story, let us explain…

Firstly to try and enter the market during such a volatile time can be tricky. Your orders, fills and stops are extremely difficult for any broker and any platform to satisfy. It’s fair to say that (industry wide) new traders raise more queries with regards to their trades on what we term “NFP day” than any other high impact news event. We’d suggest that new traders in particular take a step back and think through the process of their ECN trade during the peak period of excitement the NFP number creates, to analyze what could go wrong.

At best you’re looking at a ‘punt’ not a trade. You may get lucky you may not, but you’re also adding the other issues previously mentioned that may affect your trade which you wouldn’t experience during normal trading conditions. And that’s why the right advice is not to trade the actual number immediately before, or upon publication. But that doesn’t mean you shouldn’t trade the NFP data, far from it, just refrain from trading it with the madding crowd…

Here’s a suggestion; if you want to trade the number trade the sentiment of the first fifteen minute candle AFTER the jobs print has been published. You’ll more than likely get filled on the button, chances of slippage are reduced to normal tolerances, no re-quotes and any stop will work rather than be breached and if the print causes any momentum you’re trading in the right direction. Oh and before we move onto other subjects here’s an observation; NFP ‘day’ hardly ever reverses the medium to long term trend. Historically there were times, such as when the USA economy was shedding 700K jobs per month after the banking crisis and credit crunch, when the trend reversed quicker than a hand brake turn, but those days are long since passed. In recent times the trend stays your friend.


Market overview

There was plenty of positive economic data published on Thursday that should have encouraged positive sentiment. However, despite the ADP jobs report being bullish, official unemployment claims falling, the ISM non manufacturing print beating expectations and USA factory orders also coming in ahead of predictions, the DJIA closed flat on the day.

Europe’s indices enjoyed a positive day with few exceptions. UK FTSE closed up 0.89%, CAC up 0.66%, DAX up 0.48%. The Irish stock exchange closed up the most on the day after positive commentary from EU officials regarding any further help the country may need. The index closed up 1.28%. As we’ve mentioned throughout the week the ISE 100, the Istanbul exchange, is the most sensitive to the Syrian criss given its shared border. It closed down 0.37% on the day.

ICE WTI crude rose 1.06% on the day at $108.37 per barrel, naturally oil is sensitive towards the G20 discussions and the Middle East crisis. NYMEX natural fell 0.28% to $3.56 per therm. COMEX gold fell by 0.46% on the day to $1366.7 per ounce, silver down 0.11% at $23.16 per ounce.


Forex focus

The euro slumped by 0.7 percent to $1.3120 late in the New York session, after reaching the weakest level seen since July 19th. The dollar strengthened 0.4 percent at 100.11 yen after climbing to the strongest since July 25th. The euro depreciated 0.3 percent to 131.34 yen. The euro declined to its six-week low versus the dollar due to European Central Bank President Mario Draghi stating that officials discussed an interest-rate cut at Thursday’s policy meeting.

Sterling reached a four-month high versus the euro as the Bank of England kept its bond-purchase target at 375 billion pounds ($584 billion). The decision was widely predicted by the analysts surveyed. Policy makers also kept the key interest rate at a record-low of 0.5 percent. Sterling increased 0.4 percent to 84.16 pence per euro after reaching 84.08, the strongest level seen since May 6th. The pound declined 0.2 percent to $1.5590.

The loonie fell 0.1 percent to C$1.0505 per U.S. dollar late in the Toronto session. One loonie buys 95.19 U.S. cents. The Canadian dollar rose against the majority of its 16 most-traded peers. Data is forecast to show on Friday that the nation arrested two months of jobs losses, signaling that the economy may be finally emerging from its mid-year slowdown.


Fundamental policy decisions and high impact news events for September 5th

Friday is an incredibly busy day for high impact news events. Swiss inflation figures, UK manufacturing production and German industrial production are the key news events  in the morning session. Thereafter we move onto job numbers. Canada is predicted to maintain its unemployment rate at 7.2%. The USA NFP print is expected in at 178K jobs created, with the unemployment rate stable at 7.4%.

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