USD after Non Farm Payrolls

I’ve been talking about the US economy these days. One of the most important figures was released yesterday, the US Non-Farm Payrolls. The market expected a lower figure due to the problems caused by the hurricanes. The expected figure was 80k, which I thought that was a good forecast. My surprise came at 8:30 US time (13:30 in UK, 14:30 in Europe)  when I saw that the NFP was -33K. In contrast, the unemployment rate was 4.2% better than the 4.4% expected. I thought that the US dollar would sell off at this time. I expected a rise in the T-notes futures and the eurodollar (interest rates futures). According to the news, the market should ignore the NFP September figure as external factors have temporarily affected the economy. The unemployment rate is really good, but I thought that I lost my touch with the market when I saw the initial rally in the dollar. Luckily, the rationality appeared after a couple of minutes and the initial movement was reversed.

Let’s check how it affected some currency pairs, 10Y T-Note Futures and the Spread I commented yesterday:

Euro

    Source: TradingView, EURUSD Dec17 futures, 30 min

 As I said before, the initial movement was a sell-off. This is a 30 min chart so you can't see when it started the reversal but you can see the big shade in the candle highlighted in yellow. After a couple of hours, the max of the day was broken.


GBP

    Source: TradingView, GBPUSD Dec17 futures, 30 min

In the case of the British Pound was a bit different. The first reversal was really strong. The buyer's pressure was very high. I guess they shared my thoughts. This movement wasn’t successful at all. In the next hour, he dollar raised vs the pound but it stopped around 1.3060. After that, this contract went up.

JPY

    Source: TradingView (OANDA), USDJPY , 30 min

The USDJPY behaved like the British Pound.  It went up until the buying pressure disappeared. The reversal was bigger than the initial movement.

10Year T-Note Futures

    Source: TradingView, 10 Year T-Note Dec17 futures, 30 min

Here we can see the correlation between different assets. The first movement was a sell-off, and then it reverted back the whole movement after two hours.  If you think about it, trading currency futures and bond futures is the same. You are trading interest rates. (Currency futures: Difference between expected interest rates in two countries or economic areas 

Bond futures: expected interest rates )

Eurodollar Spread

    Source: TradingView, Eurodollar spread GEH18-GEZ18, Daily min

This is a curiosity because yesterday I talked about interest rates. The spread moved up (the market considered that the figures were positive for the economy) but after a while, the spread fell. This spread was trading in 28 once the figure was released. At the final of the day, it closed in 26.5, so three prices movement.

Conclusion

I think the first movement was positive for the dollar because the Fed said that they will ignore September’s employment data because it´s a temporary shock. The ISM Manufacturing PMI and the ISM Non-manufacturing PMI were better than expected.

It´s really difficult to trade economic releases. You can be right, theoretically speaking, but if you have tight stops or a bad risk management, you will lose and it´s frustrating to see the market doing what you thought before after you were stopped out. You need to be right and enter with the order flow. It's not easy. I hope you like this post. 

Disclaimer

I wrote this article myself, and it expresses my own opinions that shouldn't be used as a trading advice. Trading carries considerable risk due to the high leverages involved