News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Bullish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
More View more
Real Time News
  • Euro Price Forecast: EUR/USD, EUR/JPY Eyeing ECB Weekly Bond Purchases - https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2021/03/01/Euro-Price-Forecast-EURUSD-EURJPY-Eyeing-ECB-Weekly-Bond-Purchases.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Moss&utm_campaign=twr $EUR $EURUSD $EURJPY https://t.co/2phQjBQPO1
  • 🇨🇭 Retail Sales YoY (JAN) Actual: -0.5% Previous: 5.4% https://www.dailyfx.com/economic-calendar#2021-03-01
  • Heads Up:🇨🇭 Retail Sales YoY (JAN) due at 07:30 GMT (15min) Previous: 4.7% https://www.dailyfx.com/economic-calendar#2021-03-01
  • Slippage can be a common occurrence in forex trading but is often misunderstood. Understanding how forex slippage occurs can enable a trader to minimize negative slippage, while potentially maximizing positive slippage. Learn about FX slippage here: https://t.co/Blrl0uF2Ct https://t.co/y5QA5ZNvgs
  • 🇷🇺 Markit Manufacturing PMI (FEB) Actual: 51.5 Previous: 50.9 https://www.dailyfx.com/economic-calendar#2021-03-01
  • Heads Up:🇷🇺 Markit Manufacturing PMI (FEB) due at 06:00 GMT (15min) Previous: 50.9 https://www.dailyfx.com/economic-calendar#2021-03-01
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/XuRCWHWsEV
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 93.74%, while traders in GBP/JPY are at opposite extremes with 64.08%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/0MjvT6Ao40
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.55% 🇦🇺AUD: 0.55% 🇬🇧GBP: 0.39% 🇪🇺EUR: 0.09% 🇯🇵JPY: 0.06% 🇨🇭CHF: -0.01% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/reMp23qieo
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 1.05% US 500: 0.83% Germany 30: 0.78% France 40: 0.78% Wall Street: 0.72% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/xD81ljxO7y
Preview for January NFPs and Trade Setups for EUR/USD, USD/JPY

Preview for January NFPs and Trade Setups for EUR/USD, USD/JPY

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- Euro and Yen likely to move in same direction around NFPs.

- Retail crowd continues to fade recent US Dollar selloff.

- As market volatility rises, it's a good time to review risk management principles.

It's the first US labor market report after the Federal Reserve's December policy rate hike, one which is being viewed with much consternation as global economic and financial market conditions have soured dramatically in the first few weeks of 2016. With US economic data already off to a terrible start to the year - it's worst since 2009, according to the Citi Economic Surprise Index - markets are very much of the mindset to question the Fed's intended rate hike path.

The key question today: is US labor market strength strong enough to keep the Fed rate hike optimism afloat? Current expectations for today's data are only decent, with the Unemployment Rate expected to hold at 5.0%, and the headline jobs figure to come in at +190K after December's impressive +292K. Likewise, due to base effects, wage growth figures are due to come in at a muted +2.2% y/y.

The market consensus for today's NFP release seems to be reasonably muted. The two inputs used in the 10-year Nonfarm Payroll Regression Model, ADP Employment Change and the ISM Services Employment sub-index, have both subsided in recent prints. As a result, the regression model is forecasting January Nonfarm Payrolls at +193K. I’ve also included the summary table on the stats.

Chart 1: 10-year Nonfarm Payrolls Regression Model

Preview for January NFPs and Trade Setups for EUR/USD, USD/JPY

NFP multiple regression model ADP ISM services 2006 to 2015

Table 1: 10-year NFP Regression Model Statistical Summary

Preview for January NFPs and Trade Setups for EUR/USD, USD/JPY

Note: these are publicly available data, and a basic form of analysis is being used, so these findings aren't necessarily unique.

A disappointing print relative to the strong December figure wouldn't be all that surprising, particularly in context of the warmer weather in December - the warmest on record in the US - so there may be a payback period over the coming months. Likewise, especially over the past few years, there has been a statistically significant seasonal distortion in the NFP figures depending upon what month they've been issued:

Chart 2: 5-year Nonfarm Payroll Seasonality

5-year nonfarm payrolls seasonality

The simple nature of today's report - that it's not a November or December report - may prove to be a significant hurdle to a big number. It seems today that a few things have lined up for the January NFP report to be a bit of a disappointment, and the model's estimate may be too rich itself.

Given recent commentary from Fed officials - if it was the skepticism cast on their December SEP at the January FOMC meeting or more recently by NY Fed President Dudley - the US Dollar desperately needs another big print here in order for future rate expectations to firm up; currently, only zero rate hikes are being priced in next year, per the Fed Futures contract:

Table 2: Fed Funds Futures Contract Implied Probabilities: February 5, 2016

Preview for January NFPs and Trade Setups for EUR/USD, USD/JPY

Fed rate hike probabilities WIRP

See the above video for technical considerations in EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CAD, the USDOLLAR Index, and others.

Read more: USDOLLAR Eyes Major Support Ahead of ADP, ISM Services

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES