NFPs Requires a Unique Trading Approach: Less EURUSD and More EURJPY

We are heading into the market's favored market-moving event. The US NFPs don't always provide the heavy volatility that the media coverage would suggest and rarely do trends develop from the indicator in recent times; but there are very distinct trading conditions that relate directly to its presence. There is little doubt that the employment condition in the US is one of the most important fundamental factors of the next six months and beyond. Why? Because the Fed has held back from withdrawing stimulus and hiking rates because of the weak labor conditions; and the accomodative stance of the American policy authority is one of the foundations of support for risk appetite, dollar shorts and emerging market interest. That said, this single release has limited potential to change the larger scheme of our fundamental trends. Therefore, we will look at the approach to the release - as dramatic breakouts have been recorded before NFP prints (though they don't necessarily offer new trend development until at least after the weekend). As for the release itself, we need to watch the dollar and risk-sensitive pairs for short-term volatility - but swings that last longer than a few hours may not have enough time to play out.

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Given the market's attention to this data, some think the dollar's are the best place to play the volatility flux. However, I'm dubious on many of the majors setups. EURUSD would be the most obvious fundamental play; but it isn't at any remarkbly levels in my book (though a reversal of the trend from the past two weeks could be notable). Instead, I like the GBPUSD pivot/Fib/SMA confluence on support at 1.63. A break there could offer a push of 100 to 200 points given the proper motivation. I'm still short NZDUSD from yesterday at 0.8170 (100 pip stop and first target) and that is highly exposed to a natural correction from record highs. AUDUSD is a good channel reversal opportunity from 1.07; but it is not as appealing as NZDUSD to the short side (so perhaps it can be a partial offset on a long break). USDCHF is very intersting for a reversal from all-time lows; but catching bottoms is always a tricky business. Finally, USDCAD is a good greenback setup should it clear 0.98 - though it will take time to evolve into a larger reversal.

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Aside from the dollar-based pairs, there are good short-term opportunities on a number of crosses (including the yen-based pairs). EURJPY is of particular interest at the top of its rising trend channel near 117.85. A reversal in this range would be easier to catch through the shorter term. A deeper reversal opportunity is seen in CHFJPY after its remarkable run to new multi-year highs. I'll look for a drop below 95.50. CADJPY and AUDJPY are both notable breakout potentials in either bullish or bearish scenarios. AUDCAD is a potential short-term, technical correction below 1.03 if the US economy looks stronger while AUDNZD is a great longer-term, yield-based reversal opportunity above 1.31.