Currency Trade Ideas in a Manic US Stock Market Environment
-Bigger picture, price has responded to the October low and the
mentioned measured levels are in line with major support/resistance
levels (see below chart).
30 Yr. US Treasury Bond Future Continuous Contract (Dec)Weekly
Nasdaq Composite and S&P 500 IndexWeekly
-The Nasdaq and S&P 500 are pushing into channel resistance that originates at the 2009 lows.
-The dashed lines are trendlines that connect the origin of a move and
first meaningful reaction (defined as more than 6 months of weakness)
within that move. The lines identified the final highs in 2007 although
the S&P 500 did ‘ride’ the line higher for some time. The steep
slopes of the current lines denote a manic market environment. A final
‘blowoff’ into these lines is possible.
-The Nasdaq composite would consist of 2 equal legs from the 2009 low at
3921. The S&P 500 would consist of 2 equal legs at 1179 (the first
legs end at the May 2011 highs).
Trading Strategy: A possible outcome from a bond market breakout (not
yet confirmed) and US equity indices at major resistance is a reversal
from capital appreciation to capital preservation
September Jobs Report To Be Released Next Tuesday
With the federal government back up and running, the Labor Department
has announced the rescheduled release dates for some key economic
reports that were delayed by the shutdown.The Labor Department said the
closely watched monthly jobs report for September will be released at
8:30 am ET on Tuesday, October 22nd. The report was originally scheduled
for release on October 4th.
Jobs Report: Expect 200,000 Print As Unemployment Falls To 7.2% On Tuesday
Beyond putting the U.S. on the verge of default, the government shutdown
clearly had an economic impact, shaving as much as 2% off annualized
GDP growth. The debt ceiling showdown between President Obama and
Speaker Boehner also forced federal statistics agencies to delay their
relapse of important data, yet the Bureau of Labor Statistics is now
ready to issue the September jobs report, scheduled for Tuesday 22,
which should show non-farm payrolls expanding by 200,000, according to Barclays BCS -0.72%.
were forced to fly blind over the past few weeks as the government
shutdown deprived investors of crucial economic data. Arguably the most
important data point, the jobs report, was never released on October 4,
as Democrats and Republicans exchanged blows in Washington.
With the shutdown becoming a thing of the past, the Bureau of Labor
Statistics released an updated schedule of its upcoming data reports.
The September jobs number will be released on October 22, and it could
come relatively strong. Despite the negative economic impact of the
shutdown, and the hundreds of thousands of furloughed workers, Barclays
estimates the economy added 200,000 jobs in September, with the
unemployment rate falling one-tenth of a percentage point to 7.2%.
They point to falling jobless claims, which continue to trend lower.
The economy did take a hit from the protracted shutdown, with Standard
& Poor’s estimating it shaved 0.6 percentage points off annualized
fourth quarter GDP growth, or about $24 billion which effectively was
taken out of the economy. An index of sales managers is more extreme,
noting U.S. GDP was cut by 2%. Major companies, from Boeing BA +0.19%, Lockheed Martin LMT -0.36%,
and United Technologies, to Walmart and Costco acknowledged the
effects, while the Fed’s beige book revealed business owners were
unsettled by rising uncertainty.
A 200,000 print for nonfarm payrolls would suggest the labor market
is increasingly resilient. That number would top both the September
jobs report, where the economy added 169,000 jobs, and the September ADP
report which came in at 166,000. It would also set the bar higher for
the October jobs report, delayed one week to November 8, and would serve
as further evidence for the Federal Reserve that the economy is
improving, despite the self-inflicted pain caused by the shutdown.
Fundamental Forecast for Euro: Neutral
British Pound Looks Dangerously Overstretched - How do We Trade?
Fundamental Forecast for the British Pound: Neutral
Japanese Yen Strength to Be Undermined by Slowing Inflation
Fundamental Forecast for Japanese Yen: Neutral
Gold Eyes Monthly High Ahead of NFPs as Bearish Momentum Falters
Fundamental Forecast for Gold: Neutral
Method #1 – Adjust Risk-Reward Ratios to account for additional volatility
In The Number One Mistake that FX Traders Make, we saw the reason why so
many traders fail. And these are generally the same things that are the
culprit for trader failure in other markets as well. And that is the
fact that traders lose so much more when they are wrong than they win
when they are right.
Traders lose considerably more (in red) when they are wrong, than they win when they are right (blue) :
Method #2 – Back up the chart and look at the bigger picture
This method works with a similar theme from the earlier method, and that
is that the more uncertainty that may be in a market, the more wild and
volatile short-term price movements may become.
Scalpers may be challenged to see the same momentum or trends on
shorter-term charts as catalysts and stimuli (the same themes bringing
uncertainty in the market) may cause erratic price movements.
Traders can look to longer time frames to obviate volatile short-term uncertainty :
Method #3 – You don’t HAVE to trade if you feel uncertain
As a trader, you don’t ALWAYS have to be trading something :
Stocks: Nothing holding the market back
They'll turn their attention back to the economy and earnings.
The September jobs report, delayed by the government shutdown, will finally be released Tuesday. The report was originally scheduled to come out on October 4.
According to economists surveyed by Briefing.com, it is expected that
183,000 jobs were added last month and that unemployment rate remained
steady, at 7.3%.
This report won't provide any clues as to the
effects of the government shutdown. But weekly jobless claims reports
have already shown that impact. Last week's report, which covered the
first portion of the shutdown, revealed unemployment filings from about 70,000 federal workers. Many will be forced to pay the benefits they received back, as Congress has approved to retroactively pay federal workers.
Stocks may also set some more records. The major U.S. indexes are
all up sharply this year and held up well despite fears of a possible
debt default. The S&P 500 ended the week
at an all-time high while the Dow is about 2% off its peak of 15,709.60
from last month. The tech-heavy Nasdaq was even above 3,900. It hasn't
been that high since the dot-com bubble burst in 2000.
week, the Nasdaq gained 3%, including 1% growth on Friday. The S&P
added 2% -- and posted only one losing day last week -- and the Dow was
up about 1% on the week.
Chinese Cabinet Urges Implementation Of Policy Reforms To Boost Growth
The Chinese cabinet has urged the local governments and state
departments to implement the planned economic reforms and restructuring
measures to help the economy recover from the recent lull. In a
statement released after a meeting called by Premier Li Keqiang on
Friday, the cabinet, also known as the State Council, said that the
foundation for China's economic rebound is not yet strong.
The Asian Development Bank expects growth to moderate to 7.6 percent in
2013 and to 7.4 percent in 2014. Meanwhile, the World Bank projects
growth of 7.5 percent this year and 7.7 percent for 2014.
Forex News: Trading Tuesdays NFP Event
First, NFP looks specifically at net changes in employment as jobs are
created or subtracted in an economy in any given month. The term
Non-Farm is used since farm / agricultural workers are not included in
the employment count. The decision to not include agricultural jobs lies
in these jobs being largely seasonal that could possibly produce small
temporary shifts in labor reporting. Below we can see a composite of
past NFP events from October 2011 through present. As you can see these
numbers have been anything but consistent, causing problems for traders.
So to get an idea of what to expect, let’s look at last month’s event
in more detail.
Below we can see exactly what occurred with last month’s price action on
a EURUSD 5 minute chart, during the NFP news release. NFP numbers were
expected to be released at 180k, meaning analysts expected 180,000 new
jobs to be added to the economy. However, at the time of release the NFP
number was issued lower than expected at 169k. Traders were left to
react to this lower number with the market immediately reacting by
selling off the EURUSD. By 10:45am ET, the EURUSD had declined in value
as much as 105 pips from the event high at 1.3214!
So what should traders look for this month, with NFP totals again being
released tomorrow Tuesday the 21st? Expectations are set again at 180k
new jobs to be created. Taking a cue from last month’s report, if
expectations are missed or come out better than expected, this could
again lead to another round of volatility in the EURUSD. Once a
direction is established traders can then trade the news using the
strategy of their choosing.
Regardless if you intend to trade the news or maybe just sit on the
sidelines, remember NFP can be an exciting and will often bring
unexpected volatility. If you do decide to trade, stick with your news
trading plan and always keep an eye on risk / reward levels while
minimizing the use of leverage.
Trading the News: U.S. Non-Farm Payrolls
U.S. Non-Farm Payrolls to Climb 180K, Unemployment Rate to Hold at 7.3%
Labor Force Participation Slipped to 63.2% from 63.4% in July (Lowest Since 1978)
Trading the News: U.S. Non-Farm Payrolls
With U.S. Non-Farm Payrolls expected to increase another 180K in
September, a pickup in job growth may fuel a more meaningful rebound in
the dollar as it highlights an improved outlook for the world’s largest
Time of release: 10/22/2013 12:30 GMT, 8:30 EDT
Primary Pair Impact: EURUSD
Forecast: 160K to 200K
Why Is This Event Important:
Indeed, an upbeat employment report may heighten the appeal of the
dollar as the Fed largely retains the taper timeline laid out by
Chairman Ben Bernanke, but we may see the FOMC further delay its exit
strategy should the data highlight a slowing recovery.
The resilience in private consumption along with the ongoing expansion
in consumer credit may help to boost hiring, and a positive development
may spark a bullish reaction in the dollar as it raises the outlook for
Nevertheless, the persistent slack in the real economy may weigh on the
labor market, and we may see the Fed carry its highly accommodative
policy stance into the following year in an effort to encourage a
How To Trade This Event Risk
Bullish USD Trade: NFPs Rise 180K or More; Unemployment Rate Holds Steady
Potential Price Targets For The Release
2013-10-22 12:30 GMT (or 14:30 MQ MT5 time) | [USD - Non-farm Payrolls]
if actual > forecast = good for currency (for USD in our case)
September Nonfarm Payrolls Miss 148K vs Exp. 180K; Unemployment Rate Drops to 7.2%
jobs are a disappointment at 148K vs expectations of 180K and private
jobs only 126K well below the 180K expected, but August was revised
higher this time, from 169K to 193K. Net for the two months, largely a
nonfarm payroll employment increased by 148,000 in September, with
gains in construction, wholesale trade, and transportation and
warehousing. *Over the prior 12 months, employment growth averaged
185,000 per month.