The Trading Effects Of The Friday

The August Non-Farm Payroll (NFP) report will be released Friday at 8:30a EDT (12:30 GMT), with expectations centered on a Headline print of 217-K after last month’s as-expected 215-K reading.

The data as model indicates that the NFP report could meet the expectation, with leading indicators suggesting an August Headline NFP mark of 213-K.

The model is reliable  historically, showing a correlation coefficient of 0.90 with the unrevised NFP Headline figure dating back to Y 2001, a 1.0 would show a perfect 100% correlation.

Note: past results are not always indicative of future results.

Relative to last month, most leading indicators for the NFPs (non-farm payrolls) report have deteriorated some. The bright spot this month was the ADP employment report, which edged up from an initial estimate of 185-K last month to 190-K this month.

Both the Manufacturing and Non-Manufacturing PMI employment readings missed at 51.2 and 56.0 respectively, though they both show modest growth.

The initial jobless claims in the survey week came in at 277-K, above last month’s historically low reading at 255-K.

Unless you are clairvoyant, things become clearer as you get closer to them, but the Fed’s decision at this month’s meet is very clouded, as the US central bank appears determined to interest rates this year.

The market bets are that it will not raise rates because of the latest round of market volatility and soft economic data has many traders saying the Fed will be very cautious not to disturb the further.

That said, a Northside surprise in Friday’s NFPs report could tip the sentiment toward a rate hike ahead of the Fed’s next FOMC meet in 2 wks.

Conversely, a disappointing NFPs report accompanied by weak wages growth favors waiting until December or sometime in Y 2016.

If the NFP reading come in the 170-190-K zone, the Fed is unlikely to raise the fed funds rates until Y 2016.


There are 3 possible scenarios for this month’s NFPs report, along with the likely market reaction, as follows:

Active traders should monitor both the overall quantity of created as well as the quality of those .

Meaning, that the change in average hourly earnings could be just as critical as the Headline NFPs figure. A monthly increase of 0.1% or 0.2% in wages would likely leave many questions ahead of the FOMC meet, but a reading above that range could be a deciding factor for the central bank’s action.

Historically, /JPY has 1 of the most reliable reactions to the NFPs data, so traders with a strong bias on the outcome of the report may want to consider trading that currency pair.

Experienced traders know that the US labor market is very difficult to predict and that all forecasts should be taken lightly.

Friday’s NFP report may come in far above or far below the model’s projection, so it is essential to use stop losses and proper management in case we see an unexpected move.

And as we all know SLO’s (stop loss orders) do not always limit losses in fast markets.

Prudence and caution are the watchwords in here, this market can go either way 50/50 especially ahead of a long holiday weekend, there will always be another .

Position: Neutral (standing aside)

Stay tuned…