The EUR/USD Post NFP Fade

Every month before the non-farm payrolls report is released, I write about whether I think NFP will be better or worse than the previous month and how to trade it. Hopefully you got a chance to read my report and see the charts of how the EUR/USD typically trades post payrolls - Bar is Set High for Non-Farm Payrolls. Now that NFP has already been released, this would probably be the more relevant article Non-Farm Payrolls Improves but Unemployment Rate Soars!

However what I think is more important for us traders is how the EUR/USD is trading. At the very bottom of the NFP Preview, I talked about how “the first reaction to the non-farm payrolls report is usually not the real one that lasts for the rest of the trading day. Seven out of the last eight times non-farm payrolls were released, the knee jerk reaction was quickly erased. Even though the direction associated with these instances has not always been the same, we can see that the immediate reaction is usually not sustained, and eventually reversed into a more substantial move that lasted for the course of the trading day. When it comes to trading non-farm payrolls, it pays to wait. ”

The following chart illustrates how the EUR/USD is trading approximately 1 hour after the NFP number was released. Once again, we see an interesting V shaped reaction with the initial rally in the EUR/USD post payrolls erased VERY quickly. Based upon how the currency pair has traded following prior NFP reports this year, we can expect that this sell-off will continue for the rest of the day.

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