Friday’s Non-farm payroll report is expected to show job losses for a eighth straight month as experts are predicting the economy gave back another 70,00 jobs in the month of August. Unlike last month we were able to get number of early indicators as to the potential figures of the jobs report. The ADP private jobs report showed a loss of 33,000 jobs which was reinforced by a 11.7% increase in the Challenger Jobs cuts gauge.
Trading the News: US Change in Non-Farm Payrolls
What’s Expected
Time of release: 09/05/2008 12:30 GMT, 08:30 EST
Primary Pair Impact : EURUSD
Expected: -70K
Previous: -51K
How To Trade This Event Risk
Friday’s Non-farm payroll report is expected to show job losses for a eighth straight month as experts are predicting the economy gave back another 70,00 jobs in the month of August. Unlike last month we were able to get number of early indicators as to the potential figures of the jobs report. The ADP private jobs report showed a loss of 33,000 jobs which was reinforced by a 11.7% increase in the Challenger Jobs cuts gauge. The historically more predictive measurements of jobless claims and the ISM non-manufacturing employment component also signaled more losses to come. The unemployed rolls swelled to 444,000 from 429,000 the week prior and the service industry saw its employment reading fall to 45.4 from 47.1, which was the second lowest reading in the past seven months. Easing oil prices and the continuation of the credit crisis has reduced speculation of a Fed rate hike. Indeed, the write-down’s by banks have exceeded $500 billion and continue to mount. Until the housing market bottoms valuating mortgage back paper will continue to be a guessing game. As long as Americans are losing jobs the prospects of them paying their debts diminishes. Saving money at the pump helps but doesn’t offset a steady income stream.
The recent growth figures showed the economy gaining 3.3% in the 2Q, as sectors outside of the financial industry continue to remain resilient. Although the ISM report showed a drop in employment, it also registered a reduction in prices which could free up cash flow for companies to hire. Therefore, for a bullish dollar trade(short EURUSD) we would require a job loss of less than 40,000. With a strong fundamental mix, we will look for red, five minute candle close for a short on two lots of EURUSD. Our initial stop will be set above the nearby swing high (or reasonable distance) and the first target will equal this risk. The second objective will be discretionary; and to protect against losses, we will move the second stop to break even when the first target is hit.
On the other hand, another month of over 50,000 in job losses may be enough for dollar bears to grab momentum back especially if the total is above 100K . We will look for a inline or greater contraction in employment for a EURUSD long and will follow the same strategy as a short, just in reverse.
