8:30m (NY Time) US NFP (Nonfarm Payroll) Changes       Forecast 10K       Previous -85K
(Unemployment Rate 10.0%)

ACTION: EUR/USD               SELL -60K USD/JPY                 SELL 80K EUR/USD

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.

Of course, as usual, I will trade this release live and post the recording back in this blog.  Therefore, stay tuned.

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.”

Related posts:

1. US NFP (Nonfarm Payroll) Employment Changes 12/04/09
2. US NFP (Nonfarm Payroll) Employment Changes 01/08/10
3. US Nonfarm Payroll NFP Employment Change 03/05/2010
4. US NFP Nonfarm Payroll Employment Change 04/02/10
5. Forex Video & Analysis For U.S. Nonfarm Payroll Employment Change (NFP) 08/06/10
6. Trading The U.S. Nonfarm Payroll 06/04/10
7. Forex Trading Strategy For Nonfarm Payroll Employment Change (NFP) 07/02/10
8. US NFP (Nonfarm Payroll) Employment Changes 11/06/09
9. US Nonfarm Payroll Changes 09/04/09
10. US Non-Farm Employment Change (NFP) 10/02/09