This morning’s unemployment data out of the U.S is always a real show stopper. Traders from around the globe sit patiently huddled around their stations waiting……..waiting.
Waiting to hear how many 100’s of thousands of Americans have filed for unemployment insurance for the first time during the past week. Will it be more than the 329,000 projected new unemployment claims? How much more? Ooooooooh! Will it be less than the 329,000 American citizens projected to have filed for unemployment insurance just last week? Last week? In just a single week? Are you kidding me?
What possible difference could it make if the number was even 20k more than projected? or 20k less in a single week, when we are talking about 100’s of thousands of NEW CLAIMS!
No question that the endless printing on money has equated to “spurred job growth” eh?
Ridiculous.
I’ll wait for the numbers to consider adding to my current ´positions “short USD” or take a decent one on the chin “if” USD takes off higher here. It’s getting closer and closer to the time ( Sept) I had originally considered looking “Long USD” so I’m careful here.
I feel it’s still too early for Ben to just let this thing get out of control and see USD skyrocket so I’m going to sit tight another round here and see how this plays out.
Reading Beyond the Headlines: What Smart Traders Really Watch
The Federal Reserve’s Real Game Plan
Here’s what most retail traders completely miss about these employment numbers – they’re not trading the data itself, they’re trading the Fed’s reaction to the data. Ben Bernanke and his crew at the Federal Reserve have painted themselves into a corner with this endless quantitative easing circus. Every single employment report becomes another excuse to either continue the money printing madness or hint at tapering. The smart money isn’t asking whether unemployment claims hit 329,000 or 349,000. They’re asking: “Does this give the Fed political cover to keep the printing presses running full throttle?”
Think about it logically. The Fed has committed to keeping rates near zero until unemployment drops to 6.5%. We’re still sitting well above that magic number, which means any decent employment data gets twisted into justification for more stimulus. Bad employment data? “We need more QE to support job growth.” Good employment data? “Our policies are working, let’s stay the course.” It’s a rigged game, and the house always wins by devaluing the dollar.
Currency Pairs That Actually Matter During NFP
While everyone’s glued to EUR/USD charts like deer in headlights, the real action happens in pairs that most amateur traders ignore completely. USD/JPY becomes the playground for institutional money during these employment releases. Why? Because the Bank of Japan is playing the exact same money printing game, just with different rules. When USD weakens on poor employment data, you’ll see massive flows into the yen as a safe haven play, regardless of what Kuroda and his team are doing with their own stimulus programs.
Then there’s GBP/USD – the cable trade that separates the professionals from the weekend warriors. The pound reacts to US employment data like a seismograph during an earthquake. British traders wake up early for these releases because they know sterling will get whipsawed based purely on dollar moves, creating opportunities for quick scalps and swing positions. The correlation isn’t perfect, but it’s predictable enough for traders who understand the underlying mechanics.
September: The Month Everything Changes
Mark your calendars, because September historically brings volatility that makes these weekly unemployment claims look like child’s play. This is when the Fed typically starts floating trial balloons about policy changes. Jackson Hole symposiums, FOMC meetings with real teeth, and the beginning of fourth quarter positioning by hedge funds and pension funds. The dollar positioning I’m holding now is specifically designed around this September inflection point.
Here’s the thing about timing major currency moves – you can’t wait for confirmation. By the time CNBC is talking about dollar strength or weakness, the institutional money has already made their moves. That’s why I’m comfortable holding short USD positions even when these employment numbers create temporary noise. The bigger picture hasn’t changed: the Fed is trapped in an endless cycle of stimulus dependency, and that structural weakness will eventually overwhelm any short-term data surprises.
Risk Management When Everyone Else Is Guessing
Professional forex trading isn’t about predicting whether unemployment claims will be 320,000 or 340,000. It’s about positioning for scenarios and managing risk when the market inevitably does something unexpected. My short USD positions aren’t betting against America – they’re betting against unsustainable monetary policy. There’s a massive difference between those two concepts.
When I say I’ll “take a decent one on the chin” if USD rallies, that’s not pessimism – that’s acknowledgment that even the best analysis can be wrong in the short term. The key is sizing positions appropriately so that being wrong doesn’t blow up your account. Risk management means accepting that unemployment data might trigger a USD rally that runs against my positions for weeks or even months. But it also means having conviction that the fundamental drivers – endless money printing, artificially suppressed interest rates, and mounting debt obligations – will eventually reassert themselves.
Smart traders use these high-volatility events like employment releases to add to existing positions at better prices, not to chase momentum moves that disappear within hours. That’s exactly why I’m sitting tight, waiting for the dust to settle before making any significant adjustments to my dollar exposure.
I’m not sure the dollar is out of the woods yet. It will be interested if we get some “help” understanding what the FOMC minutes really meant in the next couple days. There’s definitely a violent disagreement going on in the FX markets.
It’s ugly out there in my view – yes.
As per usual these days really – the “confusion” as to what’s going to happen next extends week after week.
USD just “hanging” there right at the top / downward sloping trendline testing both sides patience.
Welcome to Forex right!
Looks like they’re trying to smash the “loser” on both sides before the real move happens.
Hey Kong! Hope the fishing is going well.
Thanks for providing the insight into your ongoing thought-process.
Your perspective on the CAD in the comments yesterday was also really helpful.
Have a good one!
J
Thanks man…..CAD is driving me nuts.
Love the fundamentals but trading it hasn’t been a joy ride.
I’m back in the saddle here as fishing “went” great!
Welcome back Kong!
Your fishin’ hole in the Great Northwest is a beautiful spot. It looks like a bit of Heaven to me.
There were Sasquatch sightings reported while you were up there.
Someone called in a correction…”That ain’t no Sasquatch, that’s Kong!”.
Andrew posted some important points that can not be repeated too often:
>>Not many have been suggesting that the Fed will not taper or reduce printing activities b/c they can’t.
That’s our Fed. Say one thing and do another even if that thing is a recipe for disaster.
>>I must admit, I’m not sure how the US can continue to pay the bills in an increasing interest rate environment.
We can’t. The latest figures are staggering. The Fed is printing about $33,000 every second. That is almost $2 million every single minute. Some of that is going to the Fed’s balance sheet as an “asset” due to QE. The rest goes to the market where yields (interest rates) are rising (because bond prices are falling). We get less revenue from the debt we sell and pay higher interest rates for it. A liability, not an asset.
All of this is NOT because, “we have a stable recovery albeit at lower than historical GDP growth rates”. That is the Fed’s and Wall Street’s BS. It is because buyers are much less confident about US sovereign debt.
We have been able to eventually grow our way out of every prior recession. Not this time. There is no recovery so no increasing tax revenue beyond what little more they can bleed out of the shrinking middle class. Soon stocks and real estate will take another major hit so IRAs and 401ks will get whacked at the same time the purchasing power of the dollar shrinks. And the debt burden continues to increase. It is close to the point where we can not handle it without major cuts in entitlements that half of our population, that pays no taxes, have come to take for granted.
Alexis de Tocqueville said it best about 200 years ago:
“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money”.
The updated version is, “Bribe the unproductive half of the public with the productive half of the public’s money”.
>>I was taught that it was unacceptable (even evil) to live beyond your means, but that is definitely not the majority view >>here in the U.S., as the average Joe has more debt than he knows what to do with and doesn’t see anything wrong with >>living that way personally or for the government doing so.
Exactly right Andrew. But try to avoid using economic realities, facts, experience and history, and common sense. The average Joe just won’t like it.
>>But if the US goes into a debt crisis at some point, I wonder where that leaves the rest of the world.
They are as guilty as we are and they will suffer as much as we will.
>> [rest of the world’s] expectations of govt benefits and early retirement (at least by US standards) doesn’t necessarily >>lead to higher productivity or them ending up on top.
We are all in a desperate race to the bottom. No worries about higher productivity because there ain’t no jobs. There won’t be for a long time to come.
Thanks for the opportunity to blab Andrew. Thanks for the forum Kong. It beats talking to myself because my wife no longer permits me to shout at the TV.
LOL!
Dev!
Good to be back my friend! Relaxed and ready to get back atter!
Im with you on your entire post….like every last word of it man!
Particularily the combo of waning interest in U.S soverign debt and the “joke” recovery in employment.
How this can / will “ever” be solved is currently beyond my understanding.
I have a positive fire on the USD/CAD pair on the daily now – this is going to run higher for now… next I’ll be looking at the Weekly squeeze in the par which is looking like it will fire positive as well… another 200 pips is not out of the question here easy…
WOW did the US housing data through things into a wild ride…this may break the USD/CAD run here….. tight stop set will watch & see….
Kong – question – I may have missed your thoughts on the USD for the sept/oct time-frame… your expecting a rally or large bounce up? perhaps I miss-understood…. I am thinking it should roll-over here into the fall ….
Thanks Schmed,
My original take on things (back from May) had U.S bonds, equities as well USD heading lower thru the summer, with expectation that “sometime” mid / late Sept – USD would make a strong rebound yes.
Things have played out pretty close with only equities trading “flat across the top” as opposed to taking a stronger dive as I was expecting.
I still expect considerable downside in U.S equities and global risk appetite.
USD ” in my view” indeed has further to fall here and the “79” area on $dxy looks like the area to watch for the “rebound”.
I’ll take all things into account as we get closer, as it “remains to be seen” if USD will take flows “as it once did” as the safe haven. So much has changed globally, and the next “real turn in risk” will likely provide some surprises “currency wise”.
I’ve layered “short USD/CAD” over the past two days now.
And you know as being an experienced trader…..the “timing” of some of these longer term calls is always tough (as things generally take “longer” to unfold than you’d like) so……..USD down “into” the fall” looks right to me…..with the twist being ( as always ) what we see happen with the FED as well U.S debt talks coming into play soon.