Forex and trading the NFP's

As this is Thursday evening August 5, tomorrow, (the first Friday of the month) will bring us one of the biggest reports that each month has to offer...the Non Farm Payrolls report.

This data will tell us how many jobs were estimated to be lost or gained in the last 30 days. A strong report, will generally send a currency shooting up as traders want to be a part of a strong economy.

A poor report will generally get a currency trashed, as traders fear that there will be no increase in rates coming forth any time soon.

As of this past Wednesday, when the ADP report (the temporary hiring folks), it looked as though there was employment building n the economy. Also the employment portion of this weeks ISM survey was a huge surprise upward and really boded well for this Friday report. However, today, with the unemployment numbers from last week, we were greeted with a nasty surprise, a large unexpected increase in those filing unemployment claims. so now the whole NFP report tomorrow appears to be in doubt.

But we do need to remember this: The NFP is data from the last month. The weekly jobless claims is more recent...just last week. The ISM report also reflects data from last month. In other words we may see a nice pop in the NFP tomorrow based on hiring from the last month. That is speculation only---no prediction.

But either way, we will be prepared. Most of us are already short the euro and sterling, and we'll continue to hold to hold as outlined in the alerts. It is hard to predict what tomorrow my bring in terms of the data, but if you want to trade the release, here is a decent set of parameters to do so.

If the release surprises to the upside,, the dollar is likely to get a real boost. Watch the price action for the first 5-15 minutes after the release. If a clear direction is showing, enter in the direction of the "trend" and see what you can get.

If the release surprises to the downside, do the same thing. Just remember, surprises generally force the price action one way or another, but not always. The euro and sterling are both in multi-week trends, that are actually reversals of longer term bear trends. Both have extended themselves into important resistance areas in terms of Fib numbers. So watching the price action will be paramount before entering.

I should also mention, that there are numbers of good traders who never trade the NFP because of it's volatility. There are many more who don't trade on Friday at all because of its' low liquidity when the rest of the world closes and only New York is open.

Happy Trading!

Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com