Buy the Rumor, Sell the Fact after NFP
Joe Perry February 7, 2020 2:51 PM
Today’s NFP headline number did not disappoint for January at +225K vs +160K expected.
After Wednesday’s ADP Non-Farm Employment Change, which was 291K vs 156K expected, traders were looking for a better headline NFP number today. Markets have been in risk on mode over the last few days, so anything short of “better than expected” probably would have caused markets to sell off. Today’s Non-Farm Payroll number did not disappoint for January, which was +225K vs +160K expected. Average hourly earnings (MoM) was 0.2% vs 0.3% expected. The unemployment rate up ticked slightly from 3.5% to 3.6%.
S&P Futures were slightly lower after the data, a sign that traders have been buying, while looking for a better number.
Source: Tradingview, FOREX.com
In addition, the failure of USD/JPY to push above 110.00 after the data was also a signal of “Buy the Rumor, Sell the Fact”. The pair flirted with the big round number for the past 24 hours, only to be rejected on the release of the data and trade lower.
Source: Tradingview, FOREX.com
The Fed doesn’t meet again until March 18th. Before then, we will get a look at the February NFP data. These numbers, along with fallout from the Coronavirus will help shape the view of Fed Policy going forward. Earlier in Asia, S&P lowered its 2020 Chinese growth forecast to 5% from 5.7%. Fitch also lowered China’s 2020 GDP from 5.9% to a range of 5.2%-5.7%, depending on the speed in which the virus is contained.
Any moves today will more likely be a result of how well the markets feel the Coronavirus will be contained. If the markets feel new cases could be peaking and a vaccine is right around the corner, stocks could push to all time new highs and USD/JPY could push above 110. The alternative case is that uncertainty still prevails, and markets wait until after the weekend to make a new move higher. Either way, as the better than expected NFP was already baked in, this should have minimal effect on price action.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.