EUR/USD And Non-Farm Payroll
Christopher Lewis | Jun 06, 2014 01:43AM ET
The EUR/USD had a wild ride during the session on Thursday, as the European Central Bank went into negative territory as far as real rates are concerned. Initially, this pair got absolutely hammered, slamming into the 1.35 level. This is an area that I have thought of as the “floor” of the market for some time now, and the action on Thursday certainly didn’t do much to change my mind. In fact, if you bought this pair down there on the idea that the area would be massive support – you are looking pretty good at this point.
Murphy’s Law dictates that I slept in during the session, and of course missed the move. Oh well.
The pair now has to deal with the Non-Farm Payroll numbers, and the usual nonsense that accompanies that circus. To be honest, everyone seems to understand that the numbers are basically made up at this point, and they are almost always revised later – and with a considerable miss being common. With this, the markets seem to simply accept this as the “cost of doing business”, and take the numbers at face value for the most part. However, there is a pattern that can be seen over the last few years in my opinion: The markets simply go back and forth, and rarely decide anything on these days. Because of this, I am hoping for a move lower initially after the announcement, so that I can take advantage of an obviously well-supported pair at this point in time.
What I am hoping is that the number is a bit better than usual. This will more than likely drive trade flow into the US dollar at this point, as many will think the Federal Reserve could continue to taper off of quantitative easing. However, I am going to be looking for a short-term supportive candle in order to do a “smash and grab” type of trade. It wouldn’t be that surprising to see a similar candle to the Thursday one print for this session, and if it does – there is money to be had.
However, I also recognize that the 1.37 level has been supportive in the past, and should now be resistance. This area will be difficult to hold gains above, but it could happen. I wont’ be overly impressed unless we close above it on the daily chart, which means if we shoot straight up in reaction to the announcement, I won’t be doing much until Monday. The move above that level would put 1.3950 in play again, but this would be a choppy move – as has been typical of the EUR/USD pair for longer than I care to remember.
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The most important thing to remember: If you have a plan on Non-Farm Payroll Friday – you must stick to it. If this pair goes higher right away – I am going to simply go on about my day. The market will either do something I understand and think I can profit from, or it won’t. No need to force the issue.
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