NFP: Trade the Momentum and not the Moment
Trading the moment of the NFP relaese is hit and miss, trading the momentum of the NFP is a better bet.
The volatility of the 1st Friday of each month that NFP is released is not just down to the number of jobs created, this is a complex release that has four components that Traders must be aware of:
1. The actual number of jobs reported as being created this month; July’s number is expected in at 125k, and is an average of analysts’ figures that range from 300k to 20k. The High to Low difference in opinion is enormous.
2. The revision to the previous month’s number; Probably as important as the new number, the revision can add 50k to the previous amount, and that is what creates the volatility as Traders re-align their previous thoughts on what happened four weeks ago.
3. The Employment Rate; Currently at 4.5% is one of the lowest in the world and has stayed between 4.5-4.6% recently. Any move outside this area would be dramatic
4. Average Hourly Earnings; Looking at coming in around 0.4%, this is the number that the Fed stated was causing it concern as an inflationary read.
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