John has taken over writing the Trading the News reports, but that doesn't mean I can't start a discussion topic in the forum on this week's DailyFX release.
Feel free to share any thoughts/comments/questions on what you read below. The Non Farm Payrolls data is easily one of the most market-moving events in all of forex, making outlook on any potential post-news trades particularly exciting.
What is Expected
Time of release: 8:30 EST, 12:30 GMT 7/6/2007
Primary Pair Impact : EUR/USD
Expected: 123K
Previous: 157K
Effect of US Change in Non-Farm Payrolls on EUR/USD For Past 3 Periods
How To Trade This?
The high-profile, monthly Non-Farm Payrolls release is known as the US calendar’s top market mover. However, in the past three to six months, this report’s potency has visibly worn off. In fact over the past three prints, the follow through has been greatly lacking despite modest surprises when measured up against previous numbers and expectations. Perhaps the market has become accustomed to a relatively stable print month-after-month or supplementary indicators, like the ISM services and manufacturing employment components and ADP private payrolls number, have alleviated some of the event risk. Regardless, these conditions should be taken into account when trading this report as it could limit necessary follow through price action.
While the action after the NFPs has been cooling, the lead up is consistently light as the market still appreciates the potential event risk. A positive number could leverage a large move in favor of the dollar since the single currency has been under considerable pressure recently. A print better than the 123,000 expected could generate some enthusiasm; but a figure that is closer to 200,000 is really needed to fight the rising trend. Wait for the usual confirmation of a 5-minute bar that moves in the direction of the fundamentals. A stop above the most recent swing high would be prudent and the target should be chosen by the degree of surprise the NFPs deliver.
Alternatively, a disappointing number may struggle in gaining momentum. Given the official consensus, the market is already positioning for a modest dip in payrolls. Should the read by relatively in line or slightly lower than predicted it could move EURUSD up to test the record high 1.3684. However, if the number comes in south of 100,000, it could stoke the momentum need to set in new highs. Stops should be set nearby given the limited outlook on reward; and a confirmation 5-minute bar is needed before the trade is established.
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