I'm going to go contrarian here, since I think the consensus behind NFP payroll numbers coming up is that yes, they will be high; at this point, they can only disappoint. If you recall last month's estimate of 175k blown out by an actual reading of 227k, the dollar weakened in response. Why? (Hint: It's the same reason the dollar weakened under a hawkish Yellen.)
Well the numbers looked quite impressive, but the underlying figures that the FOMC tends to scrutinize, like hourly wage growth and job growth by sector, told a story of stagnation. Based on the ADP figures put out in the beginning of the week, even the most amateur investor placed their bets on a strong dollar -- unless NFP broke 300k, nobody was expecting much of a surprise, only an upset. If any piece of information can cast the slightest doubt about the upcoming March hike it will affect price action far greater than a piece of information in support of it. On this chart I have superimposed last month's NFP dollar selloff over current price action as a mock projection of future activity. In short, the strategy here is "buy the rumor, sell the news."
Well the numbers looked quite impressive, but the underlying figures that the FOMC tends to scrutinize, like hourly wage growth and job growth by sector, told a story of stagnation. Based on the ADP figures put out in the beginning of the week, even the most amateur investor placed their bets on a strong dollar -- unless NFP broke 300k, nobody was expecting much of a surprise, only an upset. If any piece of information can cast the slightest doubt about the upcoming March hike it will affect price action far greater than a piece of information in support of it. On this chart I have superimposed last month's NFP dollar selloff over current price action as a mock projection of future activity. In short, the strategy here is "buy the rumor, sell the news."
Trade closed: target reached:
A near perfect prediction. History repeats itself, I suppose.