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Trading NFPs

Trading NFPs

John Kicklighter, Chief Strategist

The past 24 hours had its momentums, but it is the final day of trading that will really stir the market. The NFPs report on deck can tap into the very foundation of what moves this market - risk appetite - via the time table for the Fed's eventual 'Tapering' of its stimulus program.

Heading into the event risk, I have shed all trades that have direct exposure to the heavy dollar or risk-based winds that can result with the data. I currently still have my long EURCHF from 1.2310 (stop 1.2240 / T1: 2380) as it falls outside the standard risk waves. Not even the ECB rate decision seemed to materially effect the trade. However, the second half of my GBPNZD long was stopped out at breakeven where my trailed stop was.

As for my other trade from yesterday, the AUDCAD from 0.9555; I hit the first target +65 and decided to take the other half just 10 pips higher due to the impending event risk with the Canadian employment data. I will consider this again if it breaks above 0.9750.

See my video for more indepth strategy for the NFPs, but on a 'risk aversion' outcome to the data, I will be watching EURUSD to see if it can break below 1.2800 and NZDUSD below 0.7700.

Mild risk aversion also hurts the Aussie dollar and can support EURAUD (1.4050) and GBPAUD (1.6400) at their respective medium-term trendlines that they are currently both testing. If risk aversion becomes heavy, I will look again to the yen crosses with USDJPY below 99.00, EURJPY below 127 and CHFJPY below 103.

For the alternative, where risk rebounds because the Taper is pushed back. The USDollar is at a long-term resistance after a hearty run, so a rebound can play for a AUDUSD break above 0.9250 or NZDUSD break above 0.7850. Outside those pairs, the same trendlines for GBPAUD and EURAUD can find serious breaks and reversals on oversold Aussie positions.

For non-risk pairs, I like EURGBP's range from 0.8600 to 0.8475.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.