FX Trading Signals for Jan 05
1. Friday, January 5th, 2007 (7:00 am New York Time) CANADA
We have net change in employment coming out of Canada. This report has been forecasted at 15K for the last few months, and this month it's no different. Economists are again expecting the Employment figure to come out at 15K. I've looked at opinions of around 20 different economists, and only one of them is expecting the number to come out at 0K, nobody is expecting a negative number. At the same time, nobody is expecting a reading of over 21K either. In the last 6 months of trading this report, I had 4 excellent forex trades, because three times, the number came out negative, and once it came out above 50. the other two times, it came out at 16.2K and 22.4K last month, so it gave no trade signals. So why am I saying all this? I am saying all this, because this is a high probability report to give a trade, so I suggest watching it, and looking for trading opportunities. Here is what I am going to do. If this number comes out at 30K or higher, that would be good for the Canadian dollar, and it would mean a short trading signal for me on the USD/CAD pair. If it comes out at 0K or negative, it would be bad for the Canadian dollar, and it would mean a long trading signal for me on the USD/CAD pair. Anything in between would signify a no trade signal for me. I'll also keep my eye on the Unemployment rate, which is expected at 6.3%. This number is derived through different data sampling than employment change, and it could conflict. So if this number conflicts with the employment data, I would be looking to exit my trade with whatever profit I have rather sooner than later.
2. Friday, January 5th, 2007 (8:30 am New York Time) USA
Then we have the forex event of the month...the Non-Farm Payroll report. Earlier this week, we had the ADP Employment figure coming out. It was expected to come out at 120K, but shockingly came out at -40K. ADP is supposed to give us hints on what's going on with the Non-Farm payroll, because it samples the same employment data, just in much smaller quantity. Since the release of the ADP Employment, the average Non-Farm consensus was revised from 120K to 100K, and I think it should be even lower. I honestly think that a lot of the economists that gave their consensus on non-farm payroll in the last couple of weeks, simply were too busy or lazy to revise it. Another reason the ADP number was kind of discounted and the consensus was more or less kept the same was because this report already had a fluke in June of last year, coming out at 368K, and the non-farm payroll few days later came out at 134K. It'll be interesting to see what happens tomorrow :) A reading of -40K is extremely radical...I can't wait to see whether it'll be more or less confirmed. So here is what I will do tomorrow. If Non-Farm payroll will come out at 50K or less, it would be bad for the dollar and would possibly be a long trading signal for me on GBP/USD. 50K or lower reading would be the lowest reading since October of 2005. If Non-Farm payroll number reads 150K or more, it would be a very healthy reading, and good for the dollar, so it would possibly be a short trading signal for me on GBP/USD. I am going to watch out for conflicting revisions of previous number at 132K, and will also watch out for conflicts in unemployment figure, which is expected to come out at 4.5%. A big conflicting revision, can reverse the trade direction. So watch out :)
We have net change in employment coming out of Canada. This report has been forecasted at 15K for the last few months, and this month it's no different. Economists are again expecting the Employment figure to come out at 15K. I've looked at opinions of around 20 different economists, and only one of them is expecting the number to come out at 0K, nobody is expecting a negative number. At the same time, nobody is expecting a reading of over 21K either. In the last 6 months of trading this report, I had 4 excellent forex trades, because three times, the number came out negative, and once it came out above 50. the other two times, it came out at 16.2K and 22.4K last month, so it gave no trade signals. So why am I saying all this? I am saying all this, because this is a high probability report to give a trade, so I suggest watching it, and looking for trading opportunities. Here is what I am going to do. If this number comes out at 30K or higher, that would be good for the Canadian dollar, and it would mean a short trading signal for me on the USD/CAD pair. If it comes out at 0K or negative, it would be bad for the Canadian dollar, and it would mean a long trading signal for me on the USD/CAD pair. Anything in between would signify a no trade signal for me. I'll also keep my eye on the Unemployment rate, which is expected at 6.3%. This number is derived through different data sampling than employment change, and it could conflict. So if this number conflicts with the employment data, I would be looking to exit my trade with whatever profit I have rather sooner than later.
2. Friday, January 5th, 2007 (8:30 am New York Time) USA
Then we have the forex event of the month...the Non-Farm Payroll report. Earlier this week, we had the ADP Employment figure coming out. It was expected to come out at 120K, but shockingly came out at -40K. ADP is supposed to give us hints on what's going on with the Non-Farm payroll, because it samples the same employment data, just in much smaller quantity. Since the release of the ADP Employment, the average Non-Farm consensus was revised from 120K to 100K, and I think it should be even lower. I honestly think that a lot of the economists that gave their consensus on non-farm payroll in the last couple of weeks, simply were too busy or lazy to revise it. Another reason the ADP number was kind of discounted and the consensus was more or less kept the same was because this report already had a fluke in June of last year, coming out at 368K, and the non-farm payroll few days later came out at 134K. It'll be interesting to see what happens tomorrow :) A reading of -40K is extremely radical...I can't wait to see whether it'll be more or less confirmed. So here is what I will do tomorrow. If Non-Farm payroll will come out at 50K or less, it would be bad for the dollar and would possibly be a long trading signal for me on GBP/USD. 50K or lower reading would be the lowest reading since October of 2005. If Non-Farm payroll number reads 150K or more, it would be a very healthy reading, and good for the dollar, so it would possibly be a short trading signal for me on GBP/USD. I am going to watch out for conflicting revisions of previous number at 132K, and will also watch out for conflicts in unemployment figure, which is expected to come out at 4.5%. A big conflicting revision, can reverse the trade direction. So watch out :)
posted by Naveen Pantera at 10:22 AM
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