Passable NFP Allows Fed to Stay On Track to Hike in December


One more NFP down without any big revelations to stray the Fed away from a December rate hike:

USD Average Hourly Earnings m/m: 0.2% v 0.2% expected.
USD Non-Farm Employment Change: 156K v 171K expected.
USD Unemployment Rate: 5.0% v 4.9% expected.

The Fed has maintained its hawkish tone with the disclaimer being ‘if the data warrants a move’. Well, with this set of numbers out there, even being red on the headline, won’t be negative enough for the Fed to change the set course.

Most importantly as forex traders, the market’s perception of the number looks to have agreed with that statement as the already relatively high USD saw profit takers step in and end USDX and the majors basically unchanged on the day.

On Friday we were looking at this EUR/USD major trend line support and wondering if the pair was going to be obliterated by a positive NFP:

“The potential for this support level to be absolutely obliterated heading into tonight if the number beats expectation is real!”

Well taking a look at the post-NFP chart…

EUR/USD daily

EUR/USD daily

…we can see that when the numbers hit, price pushed down through the line but immediately found buyers lurking below. The number was more ‘not bad’ rather than ‘stellar good’, and the trap was set nicely to suck in anyone blindly selling the breakout as it happens.

As we spoke about above, the number won’t deviate the Fed away from their hawkish stance heading into December, but it wasn’t enough to destroy the huge EUR/USD technical level.

If you’re a reader of the blog, you know that I like to preach either setting your position up early and playing for a future break-out (a strategy that doesn’t always come off, but sets you up for a huge move if you can predict correctly), or my break and butter of waiting for confirmation that higher time frame support/resistance has held and then taking a position on the first re-test offering you excellent risk:reward.

EUR/USD hourly

EUR/USD hourly

Looking at the charts in hindsight, these are the sorts of re-tests I’m talking about when the higher time frame trend line support has held. At Monday’s open, we’re still only 40 pips above that 2nd re-test which is today’s key level heading into the debate if you’re playing from the long side.

The second US presidential debate

With a plethora of bank holidays across multiple forex trading sessions, attention again will focus around the Asian session with The Second US Presidential Debate.

Following the first debate, the market obviously awarded Clinton the winner, sending the US Dollar soaring as the status quo means interest rate normalisation remains full steam ahead.

Always trying to look for where the biggest chance of a market re-pricing might be if expectations don’t match reality, I cannot express enough how almost none of the very real Trump risk has been priced in.

What if Hillary starts coughing today? Surely Trump can’t be as unprepared as he was last time out?

This Monday

JPY Bank Holiday (Japanese banks will be closed in observance of Health-Sports Day)

CAD Bank Holiday (Canadian banks will be closed in observance of Thanksgiving Day)

USD Bank Holiday (US banks will be closed in observance of Columbus Day)

This is a guest post originally appeared on Vantage FX. Reposted with permission.

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