It is time to look at the latest NFP for the EUR/USD.
In the previous review, the 2 hours leading up to the Non-Farm Payroll offered no indication to the craziness ahead. Employment figures increased and caused an initial knee jerk reaction favoring the US Dollar. Many traders probably speculated a bullish momentum for the US Dollar and increased their bets. However upon closer observation, one would have seen that the unemployment rate had increased to 9.9%. This was due to the greater number of job seekers entering the economy. Investors started to realize the full implication of the NFP figures and the US Dollar weaken, wiping out those excessively stacked on shorting the EUR/USD.
Looking at the 5 minutes chart of the EUR/USD above, we can see that the NFP for June was a surprise.
Two hours before the release of data, the currency pair was already dropping. Whether was it because of the G20 meetings happening on that day or if any NFP data was "leaked", the drop was intensive. This is the reason why i normally include two hours before the NFP and the four hours after in my reports.
The Non-Farm Payroll came out worst than expected. While it remained an increase, it was not as much as expected. One point you may wish to note is that this contains the figures from the temporary employment of census workers by the government. The unemployment rate improved slightly, resting at 9.7%. However as an overview, this is still a high figure.
No massive drop was seen as the market seemed to have already priced the performance in. However a slight knee jerk reaction was seen, courtesy of risk aversion and it reversed minutes later. These moves are dangerous to margin accounts as it can easily wipe out positions on both sides of the trade.
An hour plus later, the EUR/USD made an attempt to rally and successfully reached the levels prior to the NFP. However late day trading pushed the currency pair down again, creating another wipe out for margin accounts stacked on long.
The Federal Reserve Chairman Bernanke mentioned that joblessness is among the “important concerns” for the recovery and is taking a heavy toll.
Remember it is extremely risky to trade during NFPs. Trade safely.
Related Forex Articles from the Koala Forex Training College.
- The US Non-Farm Payroll and the EUR/USD
- The US unemployment crisis
- Risk aversion in forex.
- The story of a margin call. Tom.
