Good day all
It is that time of the month again where we are heading into NFP… so just a few thoughts and what I will trade tomorrow.
Similar to the Dec NFP…. I really don’t think it changes anything out there…. the FED is on a pre-set path now… and hence similar to last month… I will NOT even bother to sell any of my USD longs out in case of a miss… and will just use the USD dip to add to USD longs…. The bar to derail the FED is set quite high now, especially after what we learned in the minutes yesterday….
Further… the market by now has also realised all the challenges in the NFP data right now… from record numbers where people quit their jobs to recover job openings etc… reality is.. the Labour market is tight NO matter how NFP comes out… and hence if we were to get another weak one.. it is really just an opportunity to buy a dip in the USD.
In case the data is seeing an improvement along the line of what we have seen with the ADP…. We probably can prepare ourselves for some fireworks….
The market reacted strongly to the FED minutes yesterday BUT today it feels like a bit dull BUT the only reason I feel that this is the case, is purely down to the fact that the market might just wait for NFP and if we get a stunning one… then the market will shift gear.
Current expectations are for a +400K number vs the 210k from last month…. We could argue that maybe the true expectations are running a bit higher post ADP…. So my strategy is a lot simpler than it has been during most of 2021…. See below
NFP BETWEEN 300 AND 500K MY NEUTRAL ZONE WHERE I DO NOT TRADE JUST KEEP EXISTING RISK AND SEE WHAT HAPPENS
NFP BELOW 300K WILL HOPE THE MARKET TO SELL USD AND I WILL BUY THE USD DIP.. I WILL NOT REDUCE USD LONGS
NFP ABOVE 500K SMALL BUYER OF USDJPY AND USDCHF
NFP ABOVE 600K BUYING A FEW MORE USD’S USDJPY AND USDCHF
NFP ABOVE 700K GETTING MORE AGGRESSIVE AND WIDEN THE USD BUYING TO SELL EURUSD
NFP NORTH OF 800K BUYING USD’S ALL AROUND UNTIL THE FINGER BLEED INCLUDING SELLING AUDUSD NOW TOO
Long story short… same strategy really as in December…. Long USD into the event…. More USD long post event.. either in a dip on a miss..or aggressively buying on a big beat…. This is really it… there is not more to say for the NFP
I think we might slowly enter the period where the importance of the NFP is decreasing as we all know the story now….
Good luck tomorrow
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