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 USD and would create a buy on USDJPY. Vice versa, a lower number would be bad for the USD and would generate a sell on USDJPY. 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. The Unemployment Rate, a lower number, is good for the USD and would create a buy on USDJPY. A higher number would be bad and create a sell. I am looking for these two numbers not to conflict with the headline NFP number. Average Earnings a higher number is good a lower number is bad, again this must be onside and not conflict with the headline NFP.
Historic Deviations and Their Outcome
March 5 2021 +197k positive deviation with no conflicts. The move was great on USDPYJ! 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!
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!
January 8 2021 -211 negative deviation on the headline, with a big conflict from Average Earnings. The conflict was extreme, causing USDJPY to go the wrong way. This proves the power of a significant conflict! It wasn't a trade for me, thankfully.
Average Hourly Earnings (M/M) 0.1 Change in NonFarm Payrolls 650 Unemployment Rate 6 US Average Hourly Earnings (Y/Y) 4.5
Today's Trade Plan
Today If we see a 150k 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.
Hope this helps but please do your own analysis!!
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Today gave a massive +266 deviation on the headline, and we saw the USDJPY give a good spike up. However, it retraced hard, as we saw a conflict from Average Earnings of -0.2. So the US economy added many more jobs, but those jobs paid less, which is not good for inflation. In my initial plan, I highlighted a conflict of this nature can create a dangerous trading environment, which played out perfectly today. I did the right thing by standing by and not placing any trades. I made no profit from this today, but my capital is intact, ready for next month.