Forex Crunch 7 Scenarios for Non-Farm Payrolls and Market Reaction

---

• 7 Scenarios for Non-Farm Payrolls and Market Reaction
• EUR/USD Sep. 3 – Tense Range Trading Before NFP
• Forex Daily Outlook – September 3 2010
• What Kenny Rogers Can Teach You About Trading

7 Scenarios for Non-Farm Payrolls and Market Reaction Posted: 03 Sep 2010 12:44 AM PDT Non-Farm Payrolls for August are expected to show another big drop, but with a gain in the private sector, showing that growth still continues. Here’s a preview for this release, the “king of forex trading” with 7 possible outcomes and expected market reactions. This is the most important event in forex trading, and has unique characteristics. I highly recommend reading my 5 notes for Non-Farm Payrolls trading, and especially advise newbie traders to be very careful. Now, let’s see what’s awaiting us now: NFP Background During August,  many disastrous indicators have been released. Housing has been the biggest issue, with a huge slump in home sales, showing that without stimulus measures from the government, US real estate is in the gutters. The sharp downwards revision of GDP for Q2, from 2.4% to 1.6%, also weighed heavily. The biggest impact came from Ben Bernanke – the FOMC stated that economic growth was “more modest” than expected and renewed the Quantitative Easing steps by buying government bonds. This was already too much, and the dollar changed direction – from falling on bad US figures, to rising on the return of risk – fears that the US will drag the world down sent traders to the safe haven dollar, and also the Japanese yen. Growth and Employment The key to growth is employment. In a post about the real unemployment rate, I’ve written that while employment usually lags new growth, its taking too much time. Weekly jobless claims, a great indicator for the Non-Farm Payrolls, already passed the 500K mark during August, but fell back down to 472K this week. Since February, the government’s decennial census continues to impact the headline figure. The government hired hundreds of thousands of people towards the census in May, and is releasing them gradually. As of July, there were 200K people employed around this huge project. Many of them were dismissed during August. This is what weighs on the overall figure and makes it negative. So, yet again, the focus will be on the private sector change. In July, we’ve seen a gain of 70K. According to the wide Bloomberg survey, a gain of 40K is expected now. But, as noted by Kathy Lien, this wide survey also brought very wide results – the ranges are huge. We got a hint on private sector payrolls from the ADP report on Wednesday. The correlation between both figures is far from perfect. Nevertheless, as the focus is on the private sector, the unexpected loss of 10K jobs reported by ADP is very worrying. This loss could also be reflected in the official Non-Farm Payrolls figure, making the headline number surpass 150K, raising the fears of a double-dip recession and triggering risk aversive trading – dollar positive. Here are 5 scenarios for the Non-Farm Payrolls and their effect on the dollar: NFP at -100K, private sector +40K – exactly as expected. Choppy trading but no significant move. NFP at -70K or better, private sector at +70K or better – better than expected. Dollar gains sharply. NFP at -70K or better, private sector at +40K – better than expected – dollar gains. NFP at -70K or better, private sector unchanged – surprising but mixed – dollar stalls. NFP at -150K, private sector at +40K – disappointing but not too bad – dollar retreats. NFP at -150K, private sector unchanged – disappointing – dollar falls. NFP at -150K or worse, private sector at -40K or worse, a significant loss of jobs in the private sector. This is the worst case scenario that will raise the talk of a double dip recession. In this case the dollar will gain on risk aversion. What do you think? Like this story? Vote for it on Forex Factory!

EUR/USD Sep. 3 – Tense Range Trading Before NFP Posted: 02 Sep 2010 11:55 PM PDT EUR/USD narrowed its trading range hours before the big event. Will it “explode” after the release?  Here is a quick update on fundamentals, technicals  and community trends. EUR/USD within uptrend channel, that began last week. Click to enlarge. EUR/USD Technicals Asian session:  Very quiet session, with Euro/Dollar settling between 1.2800 to 1.2840. Current Range is between 1.2770 to 1.2840. Further levels: Below, 1.2722, 1.2610, 1.2460, 1.2330 and 1.2150. Above  1.2840, 1.2930, 1.30 and 1.3110. Uptrend channel dominates: EUR/USD trades in an uptrend channel. Uptrend support began from the lows it reached on August 24th through a low on August 25th. Uptrend resistance began on a swing high on August 24th and was formed on August 26th. After losing it, EUR/USD returned to this range, and even tested the top limit with a swing move to 1.2855 – exactly at uptrend resistance. Currently the pair is in the middle of channel. EUR/USD Fundamentals All times are GMT. Most important events emphasized. 8:00: Final Services PMI. Exp. 55.6. 9:00: Retail Sales. Exp. +0.3%. 12:30: US Non-Farm Payrolls: This is the king of forex trading. Choppy trading is expected before the release. Afterwards, a V-shaped move can happen, and it can be wild. Current expectations stand on a loss of 100K jobs in general, and a gain of 40K in the private sector. The unemployment rate is predicted to tick up from 9.5% to 9.6%. It will have a rather minor role. 14:00 US ISM Non-Manufacturing PMI: Exp. 53.6 points. EUR/USD Sentiment Market is drifting between “risk on” and “risk off” with a tendency to “risk off”. With “risk off”, good US figures boost the dollar and bad ones hurt it. When risk is on, bad US figures boost the dollar. In recent days, we’ve seen more normal behavior. The 1.2610 line is critical on the downside. The Non-Farm Payrolls is a critical event that may supply the answer to the question about a double dip recession. Very choppy trading expected. Currensee Community: 56% are Short, 44% are long. These are 1005 open positions in real accounts trading this pair at the moment. Note – This is a new and still experimental section on Forex Crunch. It’s still in development. Want to see what other traders are doing in real accounts? Check out Currensee. It's free..

Forex Daily Outlook – September 3 2010 Posted: 02 Sep 2010 02:00 PM PDT We end this week with some interesting news in the US, Unemployment Rate Percentage & Non-Farm Employment Change, in Great Britain Services PMI, Paul Tucker speaks and more. Let’s see what awaits us today. In the US, The Institute for Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI), Survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Industry expansion of 53.6 points. Later in the US, the number of employed people during the previous month, excluding the farming industry, vital economic data indicates increasing of 30K, since Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. More in the US, Unemployment Rate Percentage of the total work force that is unemployed and actively seeking employment during the previous month increase by 1% it is an important signal of overall economic health. Finally in the US, Average Hourly Earnings, the price businesses pay for labor, excluding the farming industry; increased by 1% and It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer. For more on USD/CAD, read the Canadian dollar forecast. In Europe, Retail Sales, the total value of inflation-adjusted sales at the retail level increased by 3% and it’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. More in Europe, Final Services Purchasing Managers’ Index (PMI, Survey of about 600 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories stabilized on 55.6 points. For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis. In Great Britain, Halifax House Price Index (HPI), the price of homes financed by HBOS, remained the same as for last month attract investors and spur industry activity. More in Great Britain, Services PMI, Survey of purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories, businesses react quickly to market conditions. Finally in Britain, Bank of England (BOE), Deputy Governor Paul Tucker speaks at the Korea – Financial Services Board Reform Conference: An Emerging Market Perspective, in Seoul. Read more about the Pound in the GBP/USD forecast. In Switzerland, Consumer Price Index (CPI); the price of goods and services purchased by consumers increases by 8%. That’s it for today. Happy forex trading! Want to see what other traders are doing in real accounts? Check out Currensee. It's free.

What Kenny Rogers Can Teach You About Trading Posted: 02 Sep 2010 06:38 AM PDT Guest post from visionsofaffluence.com You got to know when to hold ‘em, know when to fold ‘em Know when to walk away, know when to run These are the lyrics to what many consider to be a great song, The Gambler by Kenny Rogers. Despite the obvious poker reference the message in these lyrics contains knowledge that applies to many areas of life. Indeed, knowing when to walk can save you lots of time and aggravation, and in the case of trading it can save you a whole lot of money. Too often traders find themselves taking a loss and then immediately jumping right back into the market and ending up losing again only to jump back into the market in an attempt to recoup losses only to take another loss and before you know it the trader has loss a nice chunk of his account. Now why does this happen? Well quite simply it's because the trader feels that he needs to keep trading to make his money back even though by continuing to trade he is only making matters worse. This is where the wisdom of Kenny Rogers comes into play because if these traders knew when to walk away they would keep themselves from losing even more than they already have. Even though this is the trading business sometimes the best thing to do is to refrain from trading. If you have taken a string of losses don’t keep trying to force a winning trade, instead you should stop trading and then come back later and analyze your actions to find out what you were doing wrong. This will help you not only because it will keep you from extending your losing streak, but also because it will help you to learn from your mistakes so that you will be less likely to make them again. So the next time you find yourself down on the day and itching to jump back in to another trade I want you to pause for a moment and think to yourself, what would Kenny Rogers do? If you want to discover what it takes to be able to trade for a living. Then visit visionsofaffluence.com Want to see what other traders are doing in real accounts? Check out Currensee. It's free..

You are subscribed to email updates from Forex Crunch To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610