NEWS TRADING (By Henry Liu)
1. Friday February 5, 2010 (7:00am NY Time) CA
Employment Changes Forecast 15.2K Previous -2.6K
Unemployment Rate Forecast 8.5% Previous 8.5%
If the employment number is higher, we would SELL USD/CAD, and if
the employment number is lower, we would BUY USD/CAD. This news
indicator measures the numbers of new jobs created during the
previous month, however in this case, we will see how many jobs were
actually lost, and less negative numbers mean better economy.
Our surprise factor will be at least 30K. Historically, it has
moved the market by at least 50 pips if the surprise factor is hit
by at least 80% of the time.
2. Friday February 5, 2010 (8:30am NY Time) US
NonFarm Payroll Forecast 10K Previous -85K
Unemployment Rate Forecast 10% Previous 10%
We'll be trading the NFP release today, which is expected at +10K
with a previous release of -85K; if you remember what happened last
NFP, you'd know that the last release disappointed the market and
kept USD under pressure for the better part of the months as after
a revision of November NFP to a positive number, the December
release brought back concerns over the rate of economic recovery.
At the time of writing this analysis, market is in full risk
aversion mode.
With the forecast on NFP turning positive for the first time, we
could see a bullish sentiment on the USD as a result of market
psychology. However, there are several things that we need to
consider for tomorrow's NFP release.
First of all, there is a possible increase in the total jobs count
as the Obama administration hired over 550K temporary workers for
the national census. Should this number make in the January 2010
count, expect to see a blow out positive number in the NFP release
and a possible 1.0% decrease in the unemployment rate.
Secondly, the BLS or Bureau of Labor Statistics will release its
annual benchmark revision for the payrolls. Expect to see a
significant downward revision on the first quarter of 2009, which
may offset the NFP release numbers all together if the revision is
significant.
Therefore, let's talk about how to trade this release: We'll wait
for the numbers to come out, but will not take any trade YET, even
if we get our tradable figures (-60K or 80K). We'll wait for a
possible revision to the previous release number, which is -85K, as
the market usually overreacts with the Revision and chances favor
for this trade to work out if we do not get conflicting releases
between the revision and the actual release; then we will wait for
the Benchmark Revision... at this point, still stay out of the market.
Then the next step is to wait for the Unemployment Rate, which is at
10.0%. If the Unemployment Rate were to surprise higher, we'll have
to really make an executive decision at the time of the release and
see what is the primary focus of traders. As long as we don't
surprise the 10.5%, I think the market will probably pay more
attention to the NFP release. Of course if the census workers were
to be included in this release, then expect to have a much lower
than expected unemployment rate...
After all of the numbers have been released. Wait for the market to
push... then be patient and wait for a decent retracement before
getting in. Look for recent support/resistance areas for entry as a
high impact news with various components will usually be extremely
volatile, and those who are patient will always get a chance to
enter at much better entry.
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."
Friday, February 5, 2010
Monday, February 1, 2010
NEWS TRADING..MONDAY FOR FOREX
NEWS TRADING
Monday February 1, 2010
[4:30am NY Time]
UK Manufacturing PMI BUY 56.1 SELL 52.1 GBP/USD
Our focus for today will be on the Manufacturing PMI number from UK
and it's forecasted at 52.0; UK PMI's medium point is 50, therefore
this forecast is considered as a positive release (above the 50
level means expansion in the manufacturing sector).
We are looking for a tradable deviation of 2.0, and because this is
a leading indicator and its impact may affect the future trend of
this currency for the remainder of the week or even for the month of
February, market should react to this release with volatility should
we get out deviation. We can expect GBP/USD to move 50 pips within
the hour if you deviation is hit.
Due to the risk adverse sentiment in the market and the general
strength of USD, I'd use extreme caution on the better than expected
release as GBP is still expected to depreciate against the USD in
the medium term... Take the context of the market into your trading
consideration.
DEFINITION:
"UK Manufacturing PMI is a survey of purchasing managers in the
manufacturing sector on various economic activities, including
inventory, employment, orders, etc... A higher than 50 reading means
expansion, or a less than 50 reading means contraction."
[10:00am NY Time]
US ISM Manufacturing PMI BUY 58.0 SELL 53.0 USD/JPY
Our focus today is to trade the ISM Manufacturing PMI during the New
York Trading session, and our tradable deviation for a safe trade is
2.5 points either way. In the event we get a better than expected
release, this could once again fuel the recent bullish rally of USD;
however, if the release is negative, below or close to the medium 50
level, we could see some correction in the recent rally of the
greenback... Since this is a leading indicator, investors pay more
attention to this release for signs of market direction this month
and possibly trend change.
However, with the market still just starting this year, we'll have
to pay more attention to the premarket sentiment before jumping into
a trade. In the grand scheme of things, this release shouldn't
really affect the long-term trend of the USD should we get a
negative release, but in the case of a positive release, expect to
see further downward moves in EUR/USD and GBP/USD.
DEFINITION
"The Institute of Supply Management (ISM) Manufacturing Index
measures the activity level of purchasing managers in the
Manufacturing sector, with a reading above 50 indicating expansion.
A rising trend has a positive effect on the nation's currency. To
produce the index, purchasing managers are surveyed on a number of
subjects including employment, production, new orders, supplier
deliveries, and inventories. Traders watch these surveys closely
because purchasing managers, by virtue of their jobs, have early
access to data about their company's performance, which can be a
leading indicator of overall economic performance."
[10:30pm NY Time]
RBA Rate Decision BUY 4.25% SELL 3.75% AUD/USD
Reserve Bank of Australia (RBA) is going to hike its official cash
rate once again to 4.00% as it is widely expected by the majority
economists surveyed by both Bloomberg and Reuters. Majority of
economists expected a pause in today's rate decision back in
December of 2009, and many of them had apparently jumped ship and
are now on the side of a rate hike... As a matter of fact, there are
rumors floating of a possible hike of 1/2 percent instead of the 1/4
percent forecasted...
Before we also jump on the bandwagon, remember the situation today
is no longer sunny skies with no clouds... It's more a foggy day with
low visibility, and all traders should use caution... On one hand RBA
is facing real inflationary pressure; but on the other hand, recent
equity market losses are unnerving... Should RBA decide to wait and
see, we could expect AUD to drop significantly against other
currencies, especially against USD.
RBA will also release a statement along with the rate decision.
I'll be watch closely and should there be any hint of a possible
pause, we should SELL AUD/USD immediately.
Monday February 1, 2010
[4:30am NY Time]
UK Manufacturing PMI BUY 56.1 SELL 52.1 GBP/USD
Our focus for today will be on the Manufacturing PMI number from UK
and it's forecasted at 52.0; UK PMI's medium point is 50, therefore
this forecast is considered as a positive release (above the 50
level means expansion in the manufacturing sector).
We are looking for a tradable deviation of 2.0, and because this is
a leading indicator and its impact may affect the future trend of
this currency for the remainder of the week or even for the month of
February, market should react to this release with volatility should
we get out deviation. We can expect GBP/USD to move 50 pips within
the hour if you deviation is hit.
Due to the risk adverse sentiment in the market and the general
strength of USD, I'd use extreme caution on the better than expected
release as GBP is still expected to depreciate against the USD in
the medium term... Take the context of the market into your trading
consideration.
DEFINITION:
"UK Manufacturing PMI is a survey of purchasing managers in the
manufacturing sector on various economic activities, including
inventory, employment, orders, etc... A higher than 50 reading means
expansion, or a less than 50 reading means contraction."
[10:00am NY Time]
US ISM Manufacturing PMI BUY 58.0 SELL 53.0 USD/JPY
Our focus today is to trade the ISM Manufacturing PMI during the New
York Trading session, and our tradable deviation for a safe trade is
2.5 points either way. In the event we get a better than expected
release, this could once again fuel the recent bullish rally of USD;
however, if the release is negative, below or close to the medium 50
level, we could see some correction in the recent rally of the
greenback... Since this is a leading indicator, investors pay more
attention to this release for signs of market direction this month
and possibly trend change.
However, with the market still just starting this year, we'll have
to pay more attention to the premarket sentiment before jumping into
a trade. In the grand scheme of things, this release shouldn't
really affect the long-term trend of the USD should we get a
negative release, but in the case of a positive release, expect to
see further downward moves in EUR/USD and GBP/USD.
DEFINITION
"The Institute of Supply Management (ISM) Manufacturing Index
measures the activity level of purchasing managers in the
Manufacturing sector, with a reading above 50 indicating expansion.
A rising trend has a positive effect on the nation's currency. To
produce the index, purchasing managers are surveyed on a number of
subjects including employment, production, new orders, supplier
deliveries, and inventories. Traders watch these surveys closely
because purchasing managers, by virtue of their jobs, have early
access to data about their company's performance, which can be a
leading indicator of overall economic performance."
[10:30pm NY Time]
RBA Rate Decision BUY 4.25% SELL 3.75% AUD/USD
Reserve Bank of Australia (RBA) is going to hike its official cash
rate once again to 4.00% as it is widely expected by the majority
economists surveyed by both Bloomberg and Reuters. Majority of
economists expected a pause in today's rate decision back in
December of 2009, and many of them had apparently jumped ship and
are now on the side of a rate hike... As a matter of fact, there are
rumors floating of a possible hike of 1/2 percent instead of the 1/4
percent forecasted...
Before we also jump on the bandwagon, remember the situation today
is no longer sunny skies with no clouds... It's more a foggy day with
low visibility, and all traders should use caution... On one hand RBA
is facing real inflationary pressure; but on the other hand, recent
equity market losses are unnerving... Should RBA decide to wait and
see, we could expect AUD to drop significantly against other
currencies, especially against USD.
RBA will also release a statement along with the rate decision.
I'll be watch closely and should there be any hint of a possible
pause, we should SELL AUD/USD immediately.
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