Non-Farms Payroll

Hey traders, this is Nathan Tucci on the Non Farms Payroll. If you have not heard, I will be hosting a live webinar tomorrow morning during the news event that you are invited to. It should be fun to get together and trade the news. If you want to get registered for the webinar, use this link: https://www2.gotomeeting.com/register/798407714

If you don’t know, the NFP (Non-Farms Payroll) is the announcement that tells us what the change in employment was from February to March (or whatever 2 months are prior to the current one). This number tends to have a huge affect on the Forex market because employment numbers are considered one of the largest indicators of an economy’s well-being.

The NFP has actually released positive news for the U.S. The last three announcements in a row. I am not saying to base your trade plan off of that alone, but it is rare to have more than 2 or 3 consecutive positive announcements for any news event for any area.

We determine whether news is “positive” or “negative” based on the actual number released vs. what the “experts” were expecting the number to be. Naturally, if more people are employed than expected, that will make the US Dollar stronger, and if less are employed, that will make it weaker. If the expectations are right on, the market will most likely not react much.

In this article, I am going to explain what I am thinking about the EUR/USD in my long term analysis, as it is the pair I will be trading during the announcement, and then I am going to talk about the strategy I will use to actually trade it when the announcement comes out. This is the strategy I will be using during the webinar, where hopefully you will be there to join me.

I’m trading the EUR/USD not necessarily because I believe that it will move the most during the news, but because I already have a lot of trading ideas for the EUR/USD, so I am interested in whether the NFP will confirm my preexisting plans for the Euro or scare me away from my trade.

Trading the Euro during the news is just my personal preference, though in terms of liquidity, the EUR/USD is always a safe bet.

There are a lot of reasons why I like to look at price-action even if a news announcement is coming out. The main reason is that price-action is King. Think about it, when you are looking back over your charts—perhaps back-testing a strategy—all you really see is the way price flowed over a certain time. You don’t say “Oh, there is a nice trend that happened to have some news confirming it” No, the news announcements were just part of that trend. So I believe in Price-action and I use it first and foremost in my trading.

With that said, let’s take a look at the EUR/USD. The first thing I want to show you is the weekly chart. I use the weekly chart a lot in my trading. For me, the long weekly movements are the best way to gauge the markets.

 

 

As I mentioned on the chart. A few weeks ago we had a twin tower bear set-up. This often means that price will be headed down for a long time to come. If you do a simple back test on your own weekly charts, you will quickly see what I mean. With that signal in mind, and the obvious downtrend that the EUR/USD is in, the current weekly bar seems like a very strong signal of a continuation of that downward trend.

 

As you may have guessed, I am very bearish on the Euro. I do have some concern with levels of resistance, but my hope is that those levels will be broken during tomorrow’s news announcement. Notice that since the bullish retrace a few months ago, the 61.8 fibo area has not been broken with any kind of authority.

 

If that zone is broken, I am confident that the Euro will be headed downward for weeks to come. Even if the Non-farms does not affect the market (which is highly unlikely), I will be taking a weekly short on EUR/USD if the weekly bar closes below that level, and I will be targeting at least 500 pips.

With that said, I am very much expecting the NFP to affect the market, and my hope is that I will be able to get in that long term entry during the announcement. Now, I know there are a ton of things to consider in terms of fundamentals, but I really don’t care about them. The fact is that the Euro could sky rocket during terrible Euro zone economic times and it could crash during their best times of prosperity. That is what makes trading Forex fun.. and dangerous. So with that in mind, I will be trading the EUR/USD using my technical analysis and then using the news to confirm that trade plan and hopefully get me off to a head start in terms of positive pips.

Okay, so here is my plan. As I mentioned, I am looking for a bearish entry on the Euro assuming not much changes between now and the news.

Ideally, I would like to see a very positive number come out for the US. This will mean that EUR/USD should fall considerably.

I will not be entering as soon as the announcements comes out even if it is positive for the US. I do not want to deal with the massive spreads during news (if you do not know, brokers heighten their spreads significantly during news events), and also because the initial reaction of the market is not always an accurate representation of what is going on. Many times, due to the massive amount of money flooding into the market, it takes a few minutes for price to settle down and figure out which way it really wants to go.

So, in an ideal situation, what I will be looking for is an instant spike to the downside confirming good US news, a slight retracement back to the upside, and then follow through back down. I will look to make my entry on the bullish retracement after the initial bearish spike.

If the news plays out like I am hoping, I will get in on a EUR/USD sell, grab some “Head-start pips” and look to hold the trade for quite some time. The news will be a confirmation of my bearish sentiment and will also break the resistance levels I am weary of if it is positive U.S. News.

If the news comes out against the US Dollar, I will most likely not be making an entry. If things in the market stay close to how they are now, I will be very weary of being long on the EUR/USD. There is a chance that the Euro could create a signal between now and tomorrow morning, making me think it is acceptable to be long, in which case I will be okay with getting long on the same retracement parameters I mentioned for a short entry.

Obviously, everything I have written in this article is totally subject to change based on the market between now and then; and even then, you never know how things will play out. This is what makes trading the Forex so exciting, especially around the news.

To find out what is actually going to happen and how I am going to handle it, join me live in the webinar tomorrow at 8:00 AM EST SHARP!

Register Here: https://www2.gotomeeting.com/register/798407714

Thanks for reading, hope to see you in the webinar!

Nathan

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  • Matthew Milliken

    I Hope it we get a clean break, I’ve been trying to scale into a short on EUR/USD for a while, looking for a quick move down to 1.26 area

  • LUIS ORPINELL

    Nice now is at 1,3035 start the race to the bears…

  • Jrobbins

    With tomorrow being Good Friday I would think the volume will be signifiantly down.

  • Thanks for the information is great and it really help. Keep up the good job.