Singapore Exchange News

I guess that’s what the markets are counting on as there is very little economic data due out this morning. While the timing is purely coincidental, a respite from news gives the market time to re-evaluate current levels and look ahead to more important data due out later in the week.With that in mind, let’s take a look back at Friday’s NFP report.

While I take no pleasure in being correct that the number would come in worse that expected, I was a little bit shocked at off and un-reliable those numbers appeared to be. How can the number of jobs created miss by a wide margin and the unemployment rate improve .4%? “Official” unemployment was reported at 9%, which some have deemed mathematically impossible. As I have said in previous blog articles, you can’t have the BLS (Bureau of Labor Statistics) without the BS!

The only significant news to speak of this morning is that German Factory Orders came in worse than expected, showing a monthly decline of 3.4% vs. an expectation of a decline of 1.5%, bringing the YoY figures lower to 19.7% from an expectation of an increase of 21.3%. This has prompted further selling in the Euro, which may have topped out at 1.385 from early last week. The market is starting to come around to the idea that without a comprehensive plan to handle the debt crisis, it will be difficult for the ECB to raise interest rates despite the growing inflation the Euro zone is experiencing.Returning to the situation in Egypt, while there is no sign that a resolution is near, order is starting to return to daily life while negotiations take place. Stay tuned for this one, and keep a close eye on oil prices.

Tags: account, article, AUD, Aussie, Australia, blog, BOE, cad, commodity, course, crisis, currenc, currency, currency market, currency trading, data, decision, dollar, dow, ECB, economic, EUR, Euro, eurusd, fed, forex, forex market, forextrading, free, fx, fxedu, gbp, idea, Il, interest, interest rate, interest rates, jpy, Kiwi, life, live, loonie, lower, market, Mike Conlon, money, news, nfp, nzd, oil, pound, practice, practice account, rate decision, retail sales, RSI, ssi, time, tip, trade, trader, unemployment, USD, Yen

It’s the first week in the month, and Friday brings the king of forex – Non-Farm Payrolls. We’re expecting to see another significant drop in jobs – still the after-effect of the government census, but also a reflection of the slowdown. Here’s a preview for this major release, including things to watch out for, and expected markets reactions.

This is the most volatile event for currency traders, especially in EUR/USD in USD/JPY, which are most vulnerable to American releases. I recommend reading my 5 notes for Non-Farm Payrolls trading, especially for new traders. Let’s see what’s expecting us now:

Importance of Private Sector Numbers

In May, Non-Farm Payrolls jumped by 433K. This result, the highest gain in a long time, was expected. In May, the US government held the decennial census, hiring hundreds of thousands of people. This hiring began many months beforehand and reached the climax in May. So, even a bigger gain was expected. The big disappointment came from the private sector, that hired a small amount of people – this is the real problem.

In June, there were expectations for a “hangover”, due to the government’s release of all the temporary workers. And this drop, of 125K, was worse than expected, also due to weak hiring by the private sector.

The census effect is slowly fading away, but the change in jobs in the private sector will still play a big role, alongside the overall number. Expectations for the headline number are for a loss of 75K jobs. A loss of more than 100K will be a disappointment, while a loss of under 50K or even a  gain in jobs will be a good surprise. But it’s important to note the change in the private sector – a gain in jobs will be good, and a loss will be bad.

With the private sector change being important, the independent ADP Non-Farm Payrolls, released on Wednesday, will receive special attention. This isn’t always the best indicator for the headline number of the NFP, but as it’s a report for the private sector, it’s importance is high. A gain of 36K jobs is predicted here.

Unemployment Rate

Regarding the unemployment rate, its role became more subtle. Changes in the unemployment rate don’t necessarily reflect the economy, but rather statistical changes. In many cases, we’ve seen confusing figures – a gain in jobs with a rise in the unemployment rate, and the opposite – a drop in jobs together with a drop in the unemployment rate.

The unemployment rate will play a role only if it rises to 10% – the double digit psychological level has a strong effect on currency markets. In the other direction, only a drop to 9.2% or lower will be a positive sign. The rate likely to be something in the middle, ticking up from 9.5% to 9.6%, leaving the scene for the Non-Farm Payrolls.

A related figure is the weekly unemployment claims. Here, we’ve seen rock steady releases in the past few months, between 440K to 480K. If this Thursday’s number is out of this range, this could affect the preparations for the NFP, but this is highly unlikely. In the sole occasion when the number stood on 429K, it was quickly dismissed as a miscalculation.

Market Reaction

In the past month, we’re back to “normal” market reaction – no risk factor. This means that the dollar falls on weak US figures and rises on good ones. This applies to “risky” currencies such as the Euro, Pound, Aussie, loonie and kiwi, as well as the so called “safe haven” currencies such as the Swissy and the yen.

Note that the initial reaction, and the strong moves that occur before the release, don’t necessarily reflect the direction that the market will take later, towards the close of the week, and into the new week. I’ll mention again – the private sector number in the Non-Farm Payrolls still plays a big role – a gain or a loss here can determine a gain or a loss for the greenback.

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..

View full post on Forex Crunch

The upcoming release of the Non-Farm Payrolls will be a correction from the previous release due to government’s cut in jobs. Here’s a preview for the NFP on July 2nd, and the things to watch out for.

The decennial census that was held in May had an impact on Non-Farm Payrolls from the beginning of the year. Hiring of people to prepare the census lasted for a few months and culminated in May. We’ve seen a huge number last month – a gain of 431K. This is about to change:

The hangover comes now – the government is cutting the temporary workers that were hired and this will probably turn into a big loss of jobs – 100K this time. The markets are ready for a blow.

Similar to last month, the focus is on private sector hiring once again. Then, there were high expectations that this core number, uninfluenced by the census will rise by 180,000 jobs. But this turned into a bitter disappointment with only 41,000 jobs gained.

Also now there are high hopes – expectations stand on a gain of 113,000 jobs in the private sector, nearly three times last month’s move. Contrary to previous months, the earlier release of the ADP Non-Farm Payrolls is of high importance this time. As the focus is on the private sector, this independent release of private sector jobs could serve as a great indicator.

The expectations from the ADP release on Wednesday stand on a gain of 58K, about half of the expectations from the private sector gain in the official NFP. If the expectations from ADP are met, we could face a bigger slump in the NFP this time.

Regarding the unemployment rate, expectations are for a rise from 9.7% to 9.8%. A rise to 10% or more will be alarming while a drop to 9.5% will be a good sign. Any number in between will be disregarded and will leave the focus on the NFP.

Impact on forex

In the recent FOMC Statement, Ben Bernanke and his colleagues lowered the forecast for the economy. This hurt the dollar. Another disappointment in jobs will probably hurt the dollar yet again, and a positive surprise will boost it.

This means that the risk factor will be rather muted. When the risk factor is in play, a disappointing NFP will boost the dollar. Still, this is the most volatile event in forex trading. As I’ve written in the article 5 notes for Non-Farm Payrolls Trading, the initial reaction to the release at 12:30 GMT is not necessarily the direction that we’ll see afterwards.

So, trade with care and good luck!

Ready to connect with real Forex traders? Currensee is the first Forex trading social network.

View full post on Forex Crunch