United States Non-Farm Employment Change May 7 2021

What does the data mean to the market?

The headline data of Non-Farm Payrolls (NFP) reflects the change in the number of people employed during the previous month. A higher number of people employed is good for the US economy and would create a buy on the USD. Vice versa, a lower number would be bad for the US and would generate a sell on the USD.

NFP comes out with six lines of data which makes this report far more complex. The other two significant lines of data I watch are the Unemployment Rate and Average Earnings.

With UR a lower number is good for the US and vice versa. Whereas AE a higher number is better for the US economy and vice versa.

All three lines must deviate in the same direction. I will not tolerate a conflict from either UR and AE.

Historic deviations and their outcome

April 2 2021 A very large deviation to the upside, but accompanied by conflicting Average Earnings, created a whipsaw that we don't like to see. This, therefore, did not hit our triggers and for good reason!

See Chart here:

https://calendar.galaxysoftwareinc.com/#/chart;i=35213;t=2021-4-2%2012:30:00.0;s=USDJPY;r=M1

March 5 2021 +197k positive deviation with no conflicts. The move was great on USDJPY! I don't trade stocks, but for those that do, look how they reacted, which was the opposite of the USD value. Better employment numbers suggest a tightening of monetary policy, which is not good for the stock market!

See Chart here:

https://calendar.galaxysoftwareinc.com/#/chart;i=33099;t=2021-3-5%2013:30:00.0;s=USDJPY;r=M1

February 5 2021 - 56k negative deviation on headline number but conflicting Unemployment and Average Earnings, However, USDJPY went in the direction of the headline number on this occasion. It wasn't a trade for me!

See Chart here:

https://calendar.galaxysoftwareinc.com/#/chart;i=28009;t=2021-2-5%2013:30:00.0;s=USDJPY;r=M1

I will use forecasts of:

Average Hourly Earnings (M/M) 0

Change in NonFarm Payrolls 1000

Unemployment Rate 5.8

Today's trade plan

Today the forecast range is far larger than last month, so we must be aware of that. If we see 300k deviations in either direction from Non-Farm Payrolls without any conflicts from Unemployment and no significant conflict from Average Earnings, we can expect an excellent move. This one can get volatile immediately after the data is released while the market digests the numbers. Hold onto your hats. This one is not for the fainthearted.

Tradable pairs

USDJPY

Hope this helps but please do your own analysis!!

Good luck!!

James Thatcher

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.