Trading the News: Non-Farm Payrolls

Commercial Content Analysts
1

What is Expected

Time of release: 08:30 EST, 12:30 GMT 4/6/2007
Primary Pair Impact : EUR/USD
Expected: 130k
Previous: 97K

Effect of Non-Farm Payrolls on the EUR/USD For Past 3 Periods

               [B]Month

[/B]
Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

Feb. 2007

        03/09/2007  13:30        GMT

        95k

        [B]97k

[/B]
-59

        -45

           Jan. 2007

        02/02/2007  13:30        GMT

        150k

        [B]111k

[/B]
-43

        -56

           Dec. 2006

        01/05/2007  13:30        GMT

        100k

        [B]167k

[/B]
-77

        -81

How To Trade This?
The upcoming NFP report may prove especially volatile given that many US and European markets will be closed for Good Friday. There have only been three instances in the past 17 years in which Non Farm Payrolls has fallen on this significant holiday, and previous price action shows that illiquidity tends to greatly accentuate post-news swings. Traders should be especially careful with entry and stop-loss orders, making sure to wait at least five minutes to enter post-news positions.
Given the recent Euro rally, many traders are looking for a dollar bounce regardless of what happens through tomorrow’s report. This sets up a potential EURUSD crash on a stronger NFP print, with a strong move to challenge support at the 1.3350. If the headline number prints above consensus estimates, markets will almost certainly bid the dollar higher immediately following the announcement. Previous results suggest that the true profit potential comes on revisions to the previous month’s data, however, as price tends to extend for longer periods of time. The news trader may go short the EURUSD if price action confirms the USD-bullish print. Stops should be placed above previous swing-highs, while profit targets will be discretionary.
If March NFP’s come in below consensus figures and/or February numbers are revised lower, we will see the opposite move in the EURUSD. Resistance is seen at the 2005 high of 1.3479, with a break above eyeing a move towards the all-time EURUSD peak. It is difficult to predict whether 1.3479 can be breached, but a sustained move above would certainly confirm a EUR-bullish bias and allow for significant price extension through the coming weeks of trade.

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