A1 Trading

Trading Ahead of NFP and FOMC Rate Decision

October 30, 2023
Frank Cabibi

Traders prepare for another volatile week as the Fed sets to update the latest interest rate data in the latest FOMC meeting. On top of that, NFP will come out Friday which is expecting to come in much lower than last month. Here are some ideas and setups for pairs surrounding USD.

EdgeFinder Analysis

As we approach the latest interest rate decisions in the US and UK, GBPUSD sits at a strong bearish bias on the EdgeFinder. The score has been in bearish territory for some time now as price action has not been strong. The fundamentals continue to point the pair towards more downside.

Wednesday and Thursday will be exceptionally volatile for this pair as we have FOMC on Wednesday and BoE the next. Both countries are expected to halt the rate hikes this time around, but what does this mean for their respective economies?

Higher rates for longer is not the ideal scenario for a country's economy, but it's the best choice for now. Lower rates will strengthen inflation and higher rates will likely cause a harsh recession. And the higher interest stays, the more prone an economy is to such a thing. The UK is expecting to hold higher rates for longer than the US until stubborn inflation comes down to its 2% target.

AUDUSD is still in the bearish camp at -5 yet price has moved up near a level of resistance. Recent dollar bearishness has caused many dollar pairs to slide regardless of higher yields over the 5% mark. ADP and NFP come out this week, which will likely spook the market.

Sentiment is mixed for both metrics. ADP numbers are expected to come in hotter than last month while Friday's number is tremendously lower. Although ADP NFP is wrong quite often when predicting actual payroll numbers, a miss will still likely be a positive move for the pair while a beat could cause further drawdown.

USDCAD is now the strongest bullish reading on the EdgeFinder. Similarly to what was mentioned about the AU pair, UC is going to be reactionary towards the news this week. In preparation for these moves, it appears that smart money has once again bought the dollar. CAD saw a small growth in positioning but it does not look like much overall.

COT is net long USD and net short CAD, retail is less than 25% long and majority short. The USD has CAD beat in just about every category except the labor market which is reading 0. Seeing any higher number on the NFP and interest rate side will be more of a bullish push for the pair. However, it is most likely that the Fed will remain unchanged this meeting.

Retail Spotlight

The majority of retail traders are bearish USD with the exception of USDCHF. USDJPY and USDCAD are the most shorted pair of the majors while the most longed are NZDUSD, AUDUSD, and GPBUSD.

Smart Money Spotlight

Last Friday's smart money report showed us that the big players are now buying the indices. SPX is the most bought up asset on the scanner right now. However, NAS was the third most sold along with NZD in second and JP225 in first. Gold also got an increase in long contracts as it sits in the top 4 on net long positions.

Fundamental Spotlight

The labor study broken down on the GBPUSD pair is shown above. Here we've seen a stronger labor market in the US and a weakening one in the UK. Higher unemployment rates in the UK have also caused pound weakness.

The EdgeFinder

All-in-one Fundamental Dashboard

30 Days Access

Free Telegram

Join for daily analysis and trade setups!

Join Telegram

DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here

A1 Trading Company

A1 Trading is a leading financial analysis and trading education company dedicated to empowering traders of all levels. Our team combines extensive market knowledge with cutting-edge technology to provide valuable insights and tools for traders worldwide.
2024 All Rights Reserved | A1 Trading Company
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram