Non-Farm Employment Change and other USD stories

eurusd31oct
Will the EURUSD retest 1.10 this week with NFP and going into US election?

Who has a job is the question of the week for USD traders with some key work-related events sure to stimulate the markets towards the end of the week.

Wednesday 8.15am GMT

Computer programmes can do a lot these days, even give traders a heads up on the Non-Farm Employment Change due on Friday. Two days ahead of the main event, the ADP (Automatic Data Processing) Non-Farm Employment Change on Wednesday uses the latest technology to make its prediction.

Last month was way off target.

People, we are still ahead of the machines (for now) and that may be why the actual figures on Friday are more important.

via GIPHY

Thursday 3pm GMT

Currently standing at 258K the US Unemployment Claims records how many new claimants there were in the month. October’s figures were a slight move in the right direction, but is that the start of a positive trend or a mere blip? This data may make you change your mind about which way you think Friday’s main event is going to send the dollar so watch closely.

Friday 8.30am GMT

Average Hourly Earnings
Non-Farm Employment Change
Unemployment Rate

The S&P futures has risen so far this week going into NFP and election
The S&P futures has risen so far this week going into NFP and election

Three big sets of data after a week of major events – it is Friday that makes or breaks your USD play this week. Pundits predict a small rise in the rate of increase in Earnings to 0.3% as well as a solid step up for the Non-Farm from 156K to 175K predicted. So it figures that they also expect a drop in Unemployment by 0.1% to 4.9%. Do you agree?

Riding the rates with 4 major currencies

jpy-yen-sign us-dollar british-pound-symbol australian-dollar-3d

Monday

11.30pm GMT

August saw the AUD interest rate drop from 1.75% to 1.50% where it has remained ever since. This month’s forecast predicts no change so traders will be focused on the Rate Statement, also at 11.30pm GMT, to pick over the Reserve Bank’s views on the economy and reasons for their decision.

??? GMT we don’t know; nobody knows, so maybe Tuesday

Some time after the Australian Rate Statement look out for the Bank of Japan’s Outlook Report. There’s a good chance they’re going to try and steal Australia’s thunder as they’ve been known to time announcements for media advantage in the past so it could happen any time around 11.30pm GMT. But then again, as there’s no indication it might not be for hours after! Also watch out for the BoJ Policy Rate and Monetary Policy Statement. All three events will cause volatility in the JPY markets. They will be followed by a BoJ Press Conference and this is not to be missed. Questions from the audience could cause a bit of a splash. Look I had to get this wriggling turtle butt in somehow. It’s too cute!

via GIPHY

Wednesday

2pm GMT

The US joins in this week’s interest rate bonanza with the FOMC Statement. The Federal Open Market Committee likes to tweak their comments even if the USD rate isn’t changing, and this can give the markets a bit of action. This is issued at the same time as the Federal Funds Rate but traders prefer the news from the statement. Why did they make that decision? Is there the sniff of a hint that changes might come soon? This is the sort of thing traders hunger for.

Thursday

8am GMT

GBP has taken a nose-dive over the last few weeks so there should be lots of competing interest in the 4 big announcements at 8am connected to the Bank of England’s interest rate decision.

* Bank of England Inflation Report
* Monetary Policy Committee Official Bank Rate Votes
* Monetary Policy Summary
* Official Bank Rate

With inflationary pressures and a tanking currency, it might be fair to expect the 0-0-9 vote pattern of the last few months to change. But who and how many on the committee will want to change GBP interest rates? Traders will be agog and the currency will probably experience turmoil during this event.

via GIPHY

8.30pm GMT

Australia isn’t finished with market-moving events this week. Oh no. The RBA Monetary Policy Statement gives traders lots to chew over for AUD FX pairs so players should have their strategy set up and a tinnie on hand.

 

AUD mid-week hit

Even the wildlife packs a punch Down Under
Even the wildlife packs a punch Down Under

The most significant AUD event of the week is the Consumer Price Index released at 1.30am GMT on Wednesday 26th October. It is the main way inflation is assessed and if it keeps going up, that could spell an interest rate rise. Australia’s data may be released late in comparison with other countries but its importance means it hits the markets whichever way it goes. A slight rise is indicated from 0.4% to 0.5% which is good for the Aussie dollar if it comes true.

2 events moving GBP this week

The plan was simple but this isn’t what happened to the Shiaparelli mission last week.

via GIPHY

But the probe is down. It may have crashed but it’s not going anywhere else now. The same can’t be said for sterling though. After speculation about the flash crash of 7th Oct many people assumed the pound would start to climb. How wrong they were. Now almost at the point of parity with the Euro and diving towards the dollar, the fate of the pound and the British economy is far from certain. This week there are 2 main scheduled events that could send GBP up or down.

Tuesday 25th

BOE Governor Carney is scheduled to make a significant speech to the British government about the economic effect of Brexit at 3.35pm GMT.

carney-praying
Maybe a prayer will help. Worth a try.

While the mechanism for leaving the European Union hasn’t yet been triggered, nervous markets and wild speculation have resulted in repeated crashes with little bounce back. His words are guaranteed to have GBP/USD and GBP/EUR traders on tenterhooks as they watch for hints about interest rate changes and comments on inflationary effects.

Thursday 27th

9.30am GMT sees the release of the Preliminary GDP quarterly figures. The first of three GBP announcements (preliminary, second estimate and final), the Preliminary data has the biggest influence on the markets. Growth is forecast to have slowed from 0.7% growth to 0.3% in the face of recent sterling mayhem.

At the moment traders are looking to see where the new floor is going to be for the pound. It’s hovered around 1.2 dollars since around 10th October but with some wild fluctuations. However, there are mutterings it hasn’t reached its low yet and political discussions about Brexit are battering the currency. GBP seems to be in the middle of a significant revaluation and any announcements make an already jittery market likely to have a hair trigger. This means extensive volatility and chances for TIQL players to make some gains.

4 times USD traders are watching this week

Tuesday 25th 3pm GMT

oh-honey-your-consumer-confidence-is-back

The Conference Board releases its Consumer Confidence figures. Last month’s 104.1 could have been a peak as pundits indicate a steep fall to 101.5. The looming elections combined with pressure from around the world may be having an dampening effect on how US citizens feel about their financial future.

Wednesday 3.30pm GMT

The ever-reliable Crude Oil Inventories data gives dollar traders a dead-cert for action on hump day. I say reliable, I mean wildly unpredictable and therefore FUN. Last week saw forecasts of 2.2M that had looked conservative against the 4.9M of the week before turn out to be staggeringly overconfident as the stockpiles plunged -5.2M barrels. This week is anyone’s guess.

Thursday 1.30pm GMT

Core Durable Goods is a leading indicator of production and traders use it to assess how active the economy is going to be. This month sees a predicted rise to 0.2% from the negative -0.2% of September: a good sign for the dollar.

via GIPHY

Unemployment Claims shocked many with a rise to 260K last week and that number doesn’t look like it’s going away with a negligible rise to 261K on the cards this week. Traders will be watching closely but if reality goes the other way, the dollar will get a lift.

Friday 1.30pm GMT

Advanced GDP figures are released at this time on Friday to round off the week. In previous quarters, the Advanced data has tended to be more positive than the Final figures released later but as they’re the first indication, they’re jumped on eagerly by traders around the globe. This quarter’s Advanced figures are predicted to be 2.5% compared to the Final result (1.4%) of last quarter but bear in mind the Advanced back then was forecast as 2.6%. So I wouldn’t put too much faith in what anyone is saying at this point.

Midweek USD red flag events

Tuesday

shopping-dog-and-cart

The main dollar action kicks off this week with the Consumer Price Index (CPI) at 1.30pm GMT. It’s all about what’s in your basket. Are the prices going up or down in the high street? This hasn’t been negative since April this year and has been ticking along nicely around 0.2% since then. This month’s prediction is for a nudge up to 0.3% but will that bear out?

The US Core CPI is released at the same time but it excludes food and energy. Because they can be rather unpredictable, traders prefer them to be left out tend to place more stock on the Core data as the true indicator of the dollar value than the CPI above. This month the two sets of data are in direct opposition with the Core predicted to move from 0.3% to 0.2%. This is still growth though.

Wednesday

Hump day is a good day for volatile markets this week and there are two main chances for TIQL players to make a quick profit on USD. First up, the monthly Building Permits figures are out at 1.30pm GMT. Traders love these as the housing market is a leading indicator of the health of the economy. Forecast to be around 1.17M this figure has yet to regain the 1.29M seen last December. September gave a 0.1M decline to 1.14M so it’s not clear which way it will go.

oilOil. We love oil and so do dollar traders around the world. Crude Oil Inventories are always good for a stock market ride. Last week saw a staggering increase turning around oil’s fortunes. It had been in decline for 5 straight weeks but shot up to 4.9M against the predicted 0.4M rise. That’s at 3.30pm GMT for your diaries.

Thursday

unemployed-bad-joke

1.30pm GMT for the Philly Fed Manufacturing Index and the Unemployment Claims to round off the dollar week. Unemployment has been in a steady decline for around a month but that looks set to end as pundits expect an 8k rise this week to 252K. Then again they said the same last time when it actually dropped to 246K. Over in Philadelphia, manufacturers remain confident about the economic outlook but less sure than last month as the index prediction drops to 5.2 from the confident 12.8

Aussie dollar all week long

keefers_australia-1

Bam – straight in with a market-moving speech by the RBA governor Philip Lowe. 10.10pm GMT on Monday night gives you time to set up your AUD pair positions. Talking at the Citi’s 8th Annual Australian and New Zealand Investment Conference in Sydney, this is one of the new governor’s first speeches since his appointment began this month. Traders will be hanging on his every word to see if he is likely to make any changes to interest rates. Expect high levels of volatility.

philip-lowe
Philip Lowe RBA Governor

Tuesday 1.30am GMT, just a few hours later, could send the Aussie dollar ricocheting in either direction as the RBA releases the Monetary Policy Meeting Minutes detailing what led to their most recent interest rate decision. Combined with Lowe‘s speech this heralds the start of the RBA under his leadership and traders are going to pore over it. But don’t close your AUD position just yet.

Thursday 20th brings two more sizeable AUD events. The monthly Employment Change was like a bucket of cold water in September with the shocking -3.9K down from the fantastic 26.2K rise in August. Forecasts are impressively optimistic suggesting a rise of 15.2K for October. At the same time, they also release the Unemployment Rate, which was comparatively good news. dropping 0.1% to 5.6%

 

 

 

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The Rules

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Final Notes / Q&A

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  • We will release an updated app on or before Sunday 16th October 10pm BST and the new rules will take effect immediately after the release.
  • The release will also update the TIQL Terms & Conditions. In case of doubt, that document will define the correct rules and this post is just for advice.
  • For people with Spark Profit supporters, the date of joining refers to the earlier of the two dates when they joined either Spark Profit or TIQL.
  • These rules apply until further notice but may have to change in the future.

USD red flags this week

What with Monday’s Bank Holiday and a quiet Tuesday USD traders may well have decided to take a long weekend. But they’ll be back with a bang late on Wednesday for the FOMC event at 7pm GMT and from there we have a wild ride to the end of the week.

 

“I want to get off Mr. Bones’ Wild Ride!”

Mark your cards for the following events and plan your in and out points.

Thursday 1.30pm GMT brings the US Unemployment Claims, predicted to have a slight rise. You can be sure Trump and Clinton will react and the markets will jump or dive as well. The last three months have been better than expected.

Thursday 4pm GMT gives us this week’s Crude Oil Inventories. The stubbornly positive forecasters have been wrong for the last 5 weeks in a row as the number of barrels held has dropped week after week. Will this be the week that trend turns around?

Friday 1.30pm GMT gives us three key announcements at the same time.

Core Retail Sales
Producer Price Index
Retail Sales

Traders will be trying to have eyes in the backs of their heads to keep up with it all. If you have to pick one, then Retails Sales is the event to watch for currency trading. Last month slid from a stagnant 0.0% to -0.3% change so traders are wondering if this is a new direction or if the US economy will pick up after the summer. Pundits are hopeful with a 0.6% upswing predicted.

But don’t put your feet up yet. If you do nothing else then ride Yellen’s speech on the USD markets at 6.30pm GMT on Friday. And remember to get out before the weekend. But plan a clean exit. Not like this guy.

GBP Black Swan – the Flash Crash of 7th Oct

Crazy Tampa Lightning (Real-Time)


On Friday 7th October GBP crashed to a low against the dollar not seen for over 30 years. Weirdly, the lightning strike happened in less than 2 minutes and during a traditionally quiet market time for the pound.

Crash and burn for the GBPUSD
Crash and burn for the GBPUSD

For almost any trader, a flash crash can spell ruin. As far as we know, the only exception to this is TIQL traders whose losses are limited to the amount they put in. So they won’t find themselves paying out any more than they chose to invest when they first made their trade. But regular traders and spread bettors face additional costs to limit their losses when they use stop loss orders and other mechanisms. Shockingly, even these costly methods don’t protect regular traders against events like the 7th.

black_swan

When a flash crash happens, also known as a Black Swan event, trades can be triggered but not completed until many pips away from the target price point. This can mean ruinous debts, people going bankrupt and trading companies going under. When the pound crash during the traditionally quiet Asian market time, people were left with a lot of questions and there are a few theories about what caused the plunge.

  1. Algorithmic traders domino effect

    Bowser in Dominoes

    These computer programmes are designed to spot weaknesses in markets and exploit them. It is possible that a small drop in the pound was pushed further by algos aggressively selling when no traders were around to buy and off-set the damage. This would have triggered automatic stop-loss limit orders that would have helped the selling frenzy spiral out of control.

  2. Rogue algorithm
    Rogue, but not an algo
    Rogue, but not an algo

    This sounds a little like something out of The Terminator but it’s not like a computer programme ‘went bad’ and started trying to destroy the capitalist system. However, there is some speculation that a rogue algorithm was designed to react to negative news about the pound and when it spotted comments from French President, Hollande, about the effect of Brexit doing the rounds on the news and being retweeted, it decided it should sell. Then other algos followed the trend and the downward spiral was set in motion.

  3. Reaction to a speech

    Who da man
    Who da man

    While President Hollande did give a speech full of dire warnings about the effect Brexit should have on the UK so that other countries wouldn’t try and copy suit, the traders who would care about it were out of the office. London traders were either out in the early hours partying or fast asleep while New York traders were hitting the town on a Friday night. It was a kind of twilight zone for the currency. No speech should have caused a meltdown in the pound at this time on a Friday night.

  4. Fat finger
    fatfinger
    This happens when a trader puts the decimal point in the wrong place and makes a trade with a different magnitude to that intended. The massive sell order spooks the market and triggers a chain reaction. This would be amplified by algos watching and waiting for spikes in the market.
  5. All of the aboveWhat is most likely is a combination of the rogue algo, the domino effect of other algos joining in, the triggering of the stop-loss orders along with the crucial fact that there was no-one around who might want to buy because they had all finished work for the week.

The moral of the story – chill if you TIQL

This could happen to any currency at any time: a spine-chilling thought for a trader but an opportunity for a big win or just a minor bump in the road for TIQL players.