Non-Farm Payroll on the EUR/JPY 08/10/2010
Here was a nice trade we took today following the release of Non-Farm Payroll. This news release was expected at -5K but came in at -95K. The initial reaction to the news was not the normal price movement the usually follows Non-Farm Payroll, especially with such a huge deviation from the expected number. As we discussed in the trading room prior to the news, the GBP/USD as well as the EUR/USD tend to have choppy movements with this release. However the USD/JPY, EUR/JPY, and the GBP/JPY tend to move much more consistently based on the numbers. Knowing this based on prior moves, these were the pairs that we had our attention focused on. Once the number came out the price initially spiked down in the Yen crosses but quickly retraced near pre-release. Seeing this I immediately went short on the EUR/JPY. As we discussed in the room the EUR/JPY should move 50 pips at least based on historical data of this release when there is this large of a deviation. Seeing the market still 15-20 pips from pre-release after the news means it had statistically under preformed, and thus we assumed based on past Non-Farm releases that it still had plenty of room to go down. After about 10-15 minutes of waiting, the market finally started to pay out. We managed to close half for +50 pips and the second half of the trade we closed for +30 pips.
The key with Non-Farm Payroll as with each and every other news release is to know how the market has responded in the past. Knowing what size deviation is needed from the expected number to create a consistent move is crucial to day trading financial news successfully. Each news release has a deviation from the expected number that must be met to create a large and consistent move. Additionally knowing the characteristics of each news release such as what pair it effects the most, does it retrace after the spike, dies it or can it change short/long term market trends. Studying each news release and the way it responded in the past 6 releases is invaluable information and in my opinion the only way to day trade news profitably.