TheNews

Trading the News: U.S. Non-Farm Payrolls

The U.S. Non-Farm Payrolls (NFP) report may spark a bearish reaction in EUR/USD as market participants expected another 230K rise in employment paired with an uptick in wage growth.

What’s Expected:



Why Is This Event Important:

A batch of positive developments may spark another near-term rally in the greenback especially as a growing number of Fed officials show a greater willingness to normalize monetary policy in 2015.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Challenger Job Cuts (YoY) (NOV)	--	-20.7%
Durable Goods Orders (OCT)	-0.6%	0.4%
Gross Domestic Product (Annualized) (QoQ) (3Q S)	3.3%	3.9%

The decline in planned job cuts along with the pickup in economic activity may generate a strong employment report, and the dollar may continue to outperform against its major counterparts over the near to medium-term amid growing bets for higher borrowing-costs in the U.S.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
ISM Non-Manufacturing Employment (NOV)	--	56.7
ADP Employment Change (NOV)	222K	208K
ISM Manufacturing Employment (OCT)	--	54.9

However, the employment report may disappoint amid the ongoing slack in the labor market, and the greenback may face a larger correction over the near-term as a weaker-than-expected NFP print drags on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: Strong Job/Wage Growth Boosts Interest Rate Expectations

• Need red, five-minute candle following the release to consider a short trade on EUR/USD
• If market reaction favors a long dollar position, sell EUR/USD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: NFP Report Falls Short of Market Forecasts

• Need green, five-minute candle to favor a long EUR/USD trade
• Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release
EUR/USD Daily

• Will retain the approach to sell-bounces in EUR/USD as price & RSI preserve the bearish trend.
• Interim Resistance: 1.2600 pivot to 1.2610 (61.8% expansion)
• Interim Support: 1.2280 (100% expansion) to 1.2290 (38.2% expansion)

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the previous month

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
OCT 2014	11/07/2014 13:30 GMT	235K	214K	+21	+66

October 2014 U.S. Non-Farm Payrolls

EURUSD M5: 83 pips pips range price movement by USD - Non-Farm Employment Change news event



GBPUSD M5: 70 pips range price movement by USD - Non-Farm Employment Change news event



USDCAD M5: 99 pips price range movement by USD - Non-Farm Employment Change news event



U.S. Non-Farm Payrolls (NFPs) increased another 214K in October following a revised 256K expansion the month prior, marking the consecutive 9th month with an employment increase over 200K. Despite the weaker-than-expected print, the unemployment rate unexpectedly slipped to an annualized 5.8% from 5.9% during the same period to mark the lowest reading since August 2008. Moreover, the report continued to highlight anemic wage growth as Average Hourly Earnings held steady at 2.0%, and the subdued outlook for inflation may encourage the Fed to retain its highly accommodative policy stance for an extended period of time in an effort to foster a stronger recovery. The greenback largely struggled to hold its ground following the mixed print as EUR/USD held above the 1.2400 handle going into the European close, with the pair ending the day at 1.2453.

--- Written by David Song, Currency Analyst and Shuyang Ren


More...