Fundamental Analysis regarding the NFP this Friday

[mattonline]

Hello,

I wanted to see if my intuition is on the right track (New to trading). I wanted to ask your opinions on the macroeconomic variables nested in your analysis of the NFP.

The economic indicators for the NFP are as follows (as of 01/04/2015, source: DailyFX.com economic calendar)

Previous 295K
Forecast 248K

EUR/USD

Scenario: If the actual result is lower than the forecast, let’s say 200K, if we were analysisng just this variable the USD would become weaker to the EUR hence buy Euros since we believe employment (without agricultural employment) has decreased, or should I look at this as concave i.e. increasing at a decreasing rate?

When we look at the bigger picture i.e. taking other macroeconomic variables into account such as GDP and Inflation levels, I can see that the U.S. GDP levels are strong so the fall in the NFP below the forecasted level suggests that the U.S. economy is actually strong? That there is higher GDP per capita and the U.S. economy is strong, hence buy USD!

Is my intuition correct? What other variables should I be looking at when analyzing the NFP?

Thanks

 

[gerryg]

Hello,

I wanted to see if I have my intuition is on the right track (New to trading). I wanted to ask your opinions on the macroeconomic variables nested in your analysis of the NFP.

The economic indicators for the NFP are as follows (as of 01/04/2015, source: DailyFX.com economic calendar)

Previous 295K
Forecast 248K

EUR/USD

Scenario: If the actual result is lower than the forecast, let’s say 200K, if we were analysisng just this variable the USD would become weaker to the EUR hence buy Euros since we believe employment (without agricultural employment) has decreased, or should I look at this as concave i.e. increasing at a decreasing rate?

When we look at the bigger picture i.e. taking other macroeconomic variables into account such as GDP and Inflation levels, I can see that the U.S. GDP levels are strong so the fall in the NFP below the forecasted level suggests that the U.S. economy is actually strong? That there is higher GDP per capita and the U.S. economy is strong, hence buy USD!

Is my intuition correct? What other variables should I be looking at when analyzing the NFP?

Thanks

The numbers below forecast weaken a currency, higher - strengthen.

Drop in labor force demand inhibits US Economy growth, which in turn triggers changes in US QE program (buck emission) and other economic measures.
Although NFP, GDP, Retail Sales and other macroeconomic data indicates the health of economy they're not absolutely correlated as other factors may be brought into play.
Simple example: NFP results may show economic slowdown and you expect to see the drop in retail sales too. But it's 'Black Friday" and huge discounts result in consumer boom what makes retail sales data absolutely unmatched with expectations.
This would be utterly dumb think that in most sophisticated economic system in the world there is something well-correlated and still unnoticed by professional traders..

 

[NVP]

or it just does something we didn't expect ............tossing a coin is a good way to play the NFP's

N

 

[mattonline]

Ah this is not intuitive at all...

Looking at the graphs yesterday, EUR/USD and the actual results of the NFP 126k - way below the forecast I would have been confident of going short and saying that the U.S. is slowing down in terms of employment but the results of the EUR/USD graph tell a different story, long was the better option.

The numbers below forecast weaken a currency, higher - strengthen.

ahh, this is what I would have expected

tossing a coin is a good way to play the NFP's

This appears to be the best method but there must be other reasons why the market trend went long...


-EDIT: Just looking at the charts again and to be honest I am unsure what times my metatrader time zones are in... I guess the report came out at 8:30 U.S. time but looks like the price movements happened between 10 - 12 (not sure if that is London or New York)

The USD - CHF followed expectations, same with USD - JPY, but the European currencies, GBP and EUR followed the opposite trend. I will leave my original response as it is just to get feedback.

Thanks

 

[tomorton]

If I had been holding open positions based on the USD I would have closed them on Friday morning at the latest but more likely earlier in the week. As it was, I was short AUD/NZD and GBP/CAD, only indirectly connected with US economy so hung on through NFP - both turned out alright on the day and I hold over the weekend. Fingers crossed.

 

[NVP]

so the usd dumps like a stone ............just go with the flow guys ..........