Get ready for NFP: our expectations and recommendations

The Japanese yen steadily strengthened yesterday because of the results of the meeting of the Bank of Japan and news from China. When the Bank of Japan expectedly left the rate unchanged, the Chinese quite unexpectedly announced that they doubted the possibility of a long-term trade deal with President Donald Trump.

That is, it is too early to stop worrying about the trade war. Therefore, safe-haven assets, the Japanese yen and gold yesterday were in high demand. Recall that in our review yesterday we recommended buying gold. So congratulations to those readers who follow our recommendations.

It is worth noting data on the Eurozone GDP that came out on Thursday. On the one hand, it came out better than expected (+ 0.2% q / q for the forecast + 0.1% q / q), and on the other hand, the growth rate is still extremely close to zero. So there’s nothing much to rejoice about. Moreover, the unemployment rate was higher than expected, and inflation in the Eurozone continues to be rather weak. Not surprisingly, the euro travelled towards the 1.1160 resistance and hit that.

The dollar was quoted quite mixed yesterday: against the yen, it fell, but against the euro and the pound - it strengthened. However, the most interesting movement will be today.

Recall that data on the US labour market will be published today. Data on unemployment and average hourly wages this Friday will be much less significant.
Our expectations for NFP are generally negative. If we compare the situation on the labour market now and a year ago, we can state its serious deterioration. One year ago, we were talking about the average value of the NFP 200K +, but recently it has been in the region of 150K, and the saddest thing for the US economy in all of this is that the indicator shows a clear downward trend.

In general, expert forecasts confirm our expectations - the average forecast is 85K. This is more than half the average NFP over the past couple of years.

However, the actual data may come out even worse. Over the past 5 months, 3 times the data on the NFP came out worse than forecasts, 1 time the analysts correctly predicted and only 1 time the actual data came out better than the forecast. So the chances are that the data will come out better than forecasts 1 to 5.

We see two trading options: riskier and more profitable and less risky, but less profitable.

The first option is about to start selling the dollar now in anticipation of weak data we have reasons for this. The US economy is slowing down. Which cannot but affect the state of the labour market. Accordingly, weak data will lead to sales of the dollar in the foreign exchange market. An excellent candidate for the sale is USDCAD. Also, gold purchases look very promising.

As for the second option, which is less risky, we are talking about news trading. The bottom line is to work upon the release of the news. Obviously, the movement will be strong and unidirectional. That is, you do not have to guess whether the dollar goes up or down but just get into a position in the direction of movement after the data is released. To do this, we place orders like buy stop and sell stop at 2-3 minutes from the current price at that time 2-3 minutes before the news release. And we are waiting for the news to be published and one of the orders will work out. After that, you just need to be patient and wait. Risks are minimal, and earnings are limited only by your patience and the extent of the reaction of the foreign exchange market to data.