With Employment figures set to dominate the price action today, I'm going to hold off on my typical overview of currency trends. Suffice to say, I've been looking for a major EUR/USD reversal lower for quite some time and think it's very due, but timing it has been difficult for me.
In news Thursday, the BoE did not make any move towards additional QE, and the GBP/USD launched 60-80 pips higher until toppish/reversing price action on EUR/USD helped pull it back down. In news Friday:
0700 CAD Employment (10.0K expected) - There's a tight range of estimates this month ranging from 0K to 35K which can help us trade a tighter 15K deviation. On small surprises, USD/CAD still trades reliably, just often to smaller targets. Expect 30-40 pips right away on a small 15-25K deviation, and 50-70 pips right away on a larger 30K+ deviation. After the initial surge, USD/CAD will generally maintain a trend and extend further in the direction of the news for the next 60-90 minutes heading into the NFP, so it would be a good idea to get in on retracements or follow the momentum after the release. Also, confirm that the Unemployment Rate (8.1% expected) isn't showing a major conflict.
--If it comes out at 25K or higher, USD/CAD should sell off 30-70 pips right away, then eventually continue lower for somewhat more over the next hour.
--If it comes out at -5K or lower, USD/CAD should rally 30-70 pips pips right away, then eventually continue higher for somewhat more over the next hour.
0830 US Nonfarm Payrolls (-5K expected) - An important change to the norm here is that they are now releasing a sub-component called "Change in Private Payrolls" (expected at 75K) that could end up being the show stealer. Also, we may be getting blanket revisions for over a year's worth of prior NFP numbers, so the revisions could be especially important this month. As far as the current release goes, typically we have to keep a close eye on unemployment rate (9.7% expected), because if there's a conflict, the initial spike should go along with NFP, but the ultimate move will reverse towards the Unemployment Rate.
With USD/JPY sitting in the 82.00's, it may be difficult for a sell trigger to gain a lot of ground, or to hold onto losses for long, so I'd be quick to exit on a sell. Conversely, a long USD/JPY signal could extend ambitiously higher into the 84.00's if the bulk of the data is positive. You never know, the BOJ could piggyback a positive NFP with intervention to get the most bang for their buck (if so, I'm thinking more like 86.00).
Once the USD/JPY trade is taken care of, about 5 minutes after the release, check out the EUR/USD and GBP/USD. They're likely to be a bit schitzophrenic for the first couple of minutes, but after 5 minutes they should be starting a clear push that you can either trade on pullbacks or just get in along with the momentum. EUR/USD and GBP/USD should eventually head higher if the bulk of the news is bad, and lower if the bulk of the news is good.
Here are the following trigger levels. Keep in mind that the initial reaction will likely be to the NFP and Private Payrolls numbers, while the response shortly after will then take into account Unemployment Rate and revisions to all prior NFP numbers:
NFP (-5K expected) 50K+ = Buy USD/JPY trigger; -60K(-) = Sell USD/JPY trigger
Private Payrolls (75K expected) 110K+ = Buy USD/JPY trigger; 25K(-) = Sell USD/JPY trigger (trigger tilted to reflect lowered expectations after ADP).
Unemployment Rate (9.7% expected) 9.9%(+) = Sell USD/JPY trigger; 9.7%(-) = Buy USD/JPY trigger.
Revision to prior month's -54K number: Revised up to 0K(+) = Buy USD/JPY trigger; Revised down to -100K(-) = Sell USD/JPY trigger
Drastic revisions to earlier NFP releases: If done, these could total 100's of K's of revisions, but it will also be quite old news. Consider strong positive revisions a bullish factor, while strong negative revisions a bearish factor on USD/JPY, but it's hard to put up trigger thresholds.
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