What are your predictions for non-farm payrolls?

[JamesIG]

This week’s feature will revolve around the U.S. non-farm payroll figures which are expected on Friday 6th October at 13.30 pm London time. Over the course of the week we will post trade ideas and articles surrounding the data release, but we’re curious what IG Community members are thinking.

 

• What is your NFP prediction?
• Why is this your prediction?
• How will you trade over the announcement?

 

What is Non-farm Payrolls?

NFP is a macro economic data release which shows the monthly change in employment for a single month, excluding the farming sector, for the United States.

 

The figure is released as part of the U.S employment report on the first Friday of the month and contains information on unemployment, job growth and payroll data, amongst other quantitative statistics.  The NFP figure is one of the most closely watched indicators relating to the employment sector and is considered an accurate reflection of job creation.

 

The Feds responsibility to keep employment within a healthy range means this figure could have a causal effect on interest rates, and by association the USD and wider economy. Generally speaking the higher the number the better it is for the economy, however a figure below consensus can still have a negative impact if it catches traders off guard.

 

How does NFP affect the markets?

Generally speaking a higher number shows economic strength and is followed by a bullish movement in the USD. Most traders look out for an addition of 100,000 jobs or more as a positive sign, whilst any less is a negative as it indicates a lack of growth.

 

Anything outside of consensus can catch traders off guard pushing them to look to additional data from the employment report such as unemployment or manufacturing payroll numbers. For example a smaller unemployment figure and high payroll would generally cause dollar strength.

 

[TimP]

Hi all

 

When trading over figures some traders look to use indicators to trade the breaks of ranges. This can be as simple as previous highs, be it daily or weekly, but there are some alternative ways.

 

The Donchian channel is rather simple and yet effective way of overlaying on your charts the high and low of the last x amount of periods (In our example below we have used the 20 day as a standard period length). The great thing about this indicator is that it can show you levels of support and resistance, and when you're a few days out of a macro event you can start to formualte a trade idea and plan of what you can see as a potential range. 

 

This way traders are able to easily visualise key levels and it can be used in a number of instances including trading data or extremes in price. Markets with very wide Donchian channels can be considered more volatile compared to those with narrow channels. Below is how it looks.

 

There are many indicators out there and so if any of you want to share what you use for trading data or what set ups you use then we would love the hear. It may also be worth having a look at Investopedia for a second account of the calculation. 

 

I have also set up my chart to show News articles 'in chart'. This way you can keep an eye on the fundamentals, whilst also looking at some technical indicators. 

[ChrisB]

All trading involves risk. Losses can exceed deposits.

 

EURUSD is one to watch ahead of NFPs, given the current weakness. NFPs are likely to be weak thanks to the hurricane impact, which didn’t show up in the August figures, so any improvement above expectations, or  better-than-expected rise in earnings, could push EURUSD lower.

 

The $1.1662 level is key, being the low from mid-August. A break of that and it could well prompt a swift move lower. With Catalonia hanging over eurozone assets euro bulls will find it hard to move higher, but a push above the end-Sept high at $1.1830 would be a start.

 

[ChrisB]

All trading involves risk. Losses can exceed deposits.

Dow

Having leapt higher into Q4, the Dow is firmly back in an uptrend – even given its extended move, it is still not ripe for much selling. However, a disappointing NFP might provide the hit to risk appetite that could prompt a drop back towards 22,400 or even lower, but this would still constitute, I suspect another opportunity to ‘buy the dip’ thanks to strong seasonal trends.

 

[Caseynotes]

I may be mis-reading IG's economic calendar but their estimate for NFP change for Sept seems to be  140k, 

while Forex Factory est 82k, 

and DailyFX est 80k.

This is all crazy talk anyway as the figure is obviously going to be 115k.

 

 

[JamesIG]

Hi 

I need to speak to someone about the IG Economic Calendar - I can't see where that is pulling through from.

 

The median estimate is 80k, with an average of 81.02k.

I can see a high analysts estimate of 153k and a low of -45k.

 

I will try and get a Bloomberg screenshot and see if I can post it. 

[Caseynotes]

Looking further afield there is a very wide spread of estimates this time round, could equate to big moves on data release.

 

http://www.zerohedge.com/news/2017-10-05/previewing-september-hurricane-disrupted-jobs-report

 

[Caseynotes]

Hi   You are right, Median est 80k. Highest est 153k. Lowest is minus 45k.

 

[JamesIG]

Non farm payrolls at -33K makes it the first negative since April 2011

 

[Caseynotes]

2 info graphics and link to report to help make sense of the data and market reaction.

 

https://www.fxstreet.com/macroeconomics/economic-indicator/nfp?utm_source=twitter&utm_medium=post&utm_campaign=socialmedia&utm_content=generic-news

 

[JamesIG]

Good snapshot visual of effect of Employment Report from Bloomberg. U.S. dollar has risen to its highest level in 10 weeks on the back of the largest gain in wages since December 2016. This would point to a higher likelihood of a rate rise by the end of year. (Goldman Raises December Rate Hike Odds To 80%)

 

U.S. two-year yields hit their highest since October 2008 at 1.52 percent. Although it's easy to get lost in the headline -33k jobs from the non-farm report, it seems the market expects this is on the back of hurricane season and therefore a short term outcome. Temporary displacement and unemployment would be an obvious knock on effect, as well as a delay to hiring.