As expected, the market stood still throughout the Asian and the European markets, ahead of the infamous NFP report. The overnight ranges were very small, varying from the cad’s 25 pips up to the pound’s 60 pips. This is the usual pattern of trading ahead of the NFP, culminating at 08:30 EST with a long 30-mins spike candle.
Its aftermath will continue during the next few days, also influencing Sunday’s open. Common sense tells traders not to have any open orders during the NFP report, and to expect the pull-back of the initial move.
Expectations are for a -56K read, which would be the third lowest read in 18 months. That number apparently supports the idea that the U.S. economy is recovering at a stronger pace than expected, and should lower the probability of a double-dip recession. However, there is one more thing that traders should keep an eye, which is as important as the NFP number itself; the revision to previous numbers.
The NFP is known as a very volatile news report, and of very being capable of forming important swing points, The current episode of dollar strength started in early December directly from the NFP report that showed substantial improvements in the labor market. The October, November, and December numbers subsequently suffered massive revisions, and leaves tenured traders looking at trading the momentum of the Friday moves, but definitely not to be trading the moment of the 08:30 EST release.
Forex trade has been very mixed recently; the euro has been swinging in a 300 pips range for a month, the pound dropped to 9-month lows, aussie is trading at a one month high, cad is at six weeks lows, while the yen recently made a fresh new low for 2010.
*Timing The Trade- The times to look for New position entries are 8pm (Asian Momentum), 2am (European Futures Move), and 7am (Chicago Reversal). Outside of those momentum-packed times traders will be intra-day trading with tight targets. The U.S. session has little forex momentum, outside of reversing whatever came before.
May The Force Be With You.
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