NFP Creates Whipsaw On Lower Average Earnings – Forex Analysis 3/7/16
EUR/USD Pushes Higher On NFP
For those that read the Friday forex commentary I talked about the price action we had been seeing after the latest NFP releases. When there is no conflict with the headline number then we tend to see a very nice follow through in the direction of the spike. When we get a conflict with Average Hourly Earnings, we have seen price follow earnings and reverse the initial spike which always goes in the direction of the NFP headline number. This latest release was no exception to that price movement and it will be something to look for moving forward.
We started off the trading day without a lower manipulation point from which we could take a stop run long for the second push to the upside. As I discussed in tonight’s daily market preview video, the European lows became our one and only lower manipulation point that actually satisfied our criteria for manipulation point selection that we detail in the DTFL day trading course. NFP created a beautiful stop run of this level and then the following 15M candle produced a valid confirmation candle. At that point the long setup became valid and all we needed to see was a deep enough pullback to hit our entry point. Unfortunately this pullback never materialized and therefore the entry was never triggered. The pullback is critical for one major point, it allows us to have a small enough stop to maintain a proper reward to risk ratio. Without a deep enough pullback, we cannot achieve the proper reward to risk profile that we desire for long term success and therefore we do not take the trade.
We got the second push to the upside that I was looking for a therefore we will be looking for the third push to the upside to complete the cycle. The main issue with the situation in the EUR/USD right now is the same issue we had Friday. We simply do not have a valid manipulation point to start the day. At this point, any lower level from which we could take a stop run long will have to develop during the process of the trading day. For those of you who are members be sure to check out the daily market preview video as I walk through a few options in greater detail.
Pound Continues Push Up
The GBP/USD is the same story but a different day. As I said all last week, we could have been in a valid cycle to the upside but we did not have a clear starting point for that move which is why I continued to trade all of last week with an open directional bias. With Friday’s continued push to the upside that would ensure that any cycle, regardless of starting point, would have given a third push and therefore be finished according to the criteria that we use. As such we would go back to trading with an open directional bias anyway, which is exactly what we will do to start the week. Upper points are rather limited with only one point that is likely to be hit. If you think about where the stops are located for the short side of the market the highs from Friday become extreme attractive as there is nothing else in the area. This makes for a great level, but level selection is only the first step and we will need to then see a valid stop run of that point to be able to trade the trade. Additionally, as there is nothing restricting the price above that level I would be happy to take a backside long if we were to break above it decisively. To the downside we have two lower levels listed on the chart from which I would take any valid stop run long.
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Forex Market News For March 7th 2016
There is no substantial news worth noting to start the week.