Today was one of those day’s that support the argument that you need to pay attention to both technicals and fundamentals when trading FX. Non-Farm Payrolls for April showed that 288,000 jobs were created, the strongest jobs number since January 2012. The number blew away many forecasts, with the median forecast at 203,000 and some of the higher ones at 250,000.
The currency reaction was a stronger dollar initially, but after we got into the U.S. session, those gains were returned. For the EURUSD, price declined around 50 pips in just over an hour to 1.3811, just one pip above the 50-day Simple Moving Average. That technical level is used by many high frequency systems.
So why did the dollar not have one of those 1% gains post NFP? Well the big takeaway is that the Fed will still not be tightening anytime soon with some forecasts on when the Fed will act only moving up a couple months to June 2015. The data also showed 806K drop out of the workforce which took the participation rate to 62.8%. Next week we will hear Janet Yellen confirm that tapering should continue but she will not be supporting the idea of hiking rates this year.
Another week of trade is almost over and EURUSD remains stuck in a range. Early next week, we may see price test this week’s lows but we may not get much past that. For now the range is very much valid, but if 1.3920 is taken out, a key thrust and stop run above 1.40 could very well happen.
The trade: Sell EURUSD at 1.3865 with a stop loss at 1.3905 and a take profit at 1.3780 The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading