EURO TRADE UP 200 PIPS ON NFP NUMBERS
The dreaded Non-Farm Payroll (NFP) Employment Change was released today and led to the sharp and volatile movements normally feared during this major Fundamental announcement. The employment data, which was positive for the US Labour Market, led to sharp gains of 100 Pips and 80 Pips against the Euro and Swiss Franc, respectively, within 2 hours of the release. Lucky Day Traders may have got some or even all of this movement if they had correctly guessed the short-term reaction of the market. However, those who were already in long-term trades based on the major trends of these two pairs, would have comfortably avoided this volatility on their way to even larger trading gains.
The number of persons employed in the United States increased by 248,000 in September, translating to a welcomed decline in the Unemployment Rate to 5.9% from 6.1%. The increase was also more than the forecast 216,000 and the previous figure of 186,000 for August. Naturally, the reaction to these numbers was sharp, positive and immediate for the US Dollar.
EURO USD- 30 MINUTE CHART
USD CHF - 30 MINUTE CHART
On the Euro pair, one could have anticipated this movement with a short position placed before the announcement, since the forecast was for an improvement in the numbers. Similarly, there was already a start to the breakout from that Pennant on the USD CHF which the trader could may have used as a sign to enter long. Nevertheless, given the history of these and other currency pairs reacting in contrast to the economic data-especially for the NFP-the trader may have had some doubt about the actual direction of the market.
Past trading losses from this and other fundamental data may have also increased the anxiety about trading altogether, inclusive of how much to get from the trade - 30 Pips, 50 Pips, 10 Pips? Complicating matters for USD CHF traders would have been the weak candle that started this breakout- a weak breakout that often leads to False Consolidation Breakouts.
USD CHF - 30 MINUTE CHART
In contrast to these difficulties, long-term traders would have already been in trades based on the larger patterns and trends on these pairs.
The EURO USD was always expected to continue bearish regardless of a single monthly economic data point. A wider view of the Daily Chart reveals that the pair had been in a sharp downtrend since May this year when it turned at the Resistance of the large Pennant Consolidation.
EURO USD - PENNANT CONSOLIDATION
Similarly, the USD CHF was continuing a sharp rally towards a major Outer Downtrend Line after breaking above the Inner Downtrend Line in August.
USD CHF - SHARP RALLY TO TREND LINE
Within this context, a short trade on the EURO USD could have been opened using the most recent bearish signals on the Daily and 4 Hour Charts. The Daily Chart had already broken a Counter Trend Line (CTL), while the 4 Hour Chart followed up with a bearish breakout from a Pennant.
DAILY CHART
4 HOUR CHART
Entry took place after the breakout, with the Stop Loss set above the Resistance of the Pennant. As you can see here, additional entry points were also possible to add to that position. The inversely correlated USD CHF provided a similar Pennant breakout setup on its 4H Chart.
4 HOUR CHART
The Stop Loss was placed below the Support with the target set for that major Trend Line target. After 7 day patient days, the target was finally hit.
DAILY CHART
For the EURO USD, however, the target at Support is likely to take a much longer time. With 150 Pips left in this trade, we could see this area hit by the end of the upcoming week.
DAILY CHART
The larger trends and setups on the Daily and 4 Hour Charts provide bigger profits with less volatility and trading stress relative to the Smaller Time Frames. Short-term reactions to important but inconsistent Economic reports have very little bearing on the main direction and targets of the larger charts. With the greater stability and clarity of these trends, Retail Traders can therefore hold on to profitable trades for a much longer period with greater confidence that their analysis and patience will be significantly rewarded.
MAIN TECHNICAL POINTS
The number of persons employed in the United States increased by 248,000 in September, translating to a welcomed decline in the Unemployment Rate to 5.9% from 6.1%. The increase was also more than the forecast 216,000 and the previous figure of 186,000 for August. Naturally, the reaction to these numbers was sharp, positive and immediate for the US Dollar.
EURO USD- 30 MINUTE CHART
USD CHF - 30 MINUTE CHART
On the Euro pair, one could have anticipated this movement with a short position placed before the announcement, since the forecast was for an improvement in the numbers. Similarly, there was already a start to the breakout from that Pennant on the USD CHF which the trader could may have used as a sign to enter long. Nevertheless, given the history of these and other currency pairs reacting in contrast to the economic data-especially for the NFP-the trader may have had some doubt about the actual direction of the market.
Past trading losses from this and other fundamental data may have also increased the anxiety about trading altogether, inclusive of how much to get from the trade - 30 Pips, 50 Pips, 10 Pips? Complicating matters for USD CHF traders would have been the weak candle that started this breakout- a weak breakout that often leads to False Consolidation Breakouts.
USD CHF - 30 MINUTE CHART
In contrast to these difficulties, long-term traders would have already been in trades based on the larger patterns and trends on these pairs.
The EURO USD was always expected to continue bearish regardless of a single monthly economic data point. A wider view of the Daily Chart reveals that the pair had been in a sharp downtrend since May this year when it turned at the Resistance of the large Pennant Consolidation.
EURO USD - PENNANT CONSOLIDATION
Similarly, the USD CHF was continuing a sharp rally towards a major Outer Downtrend Line after breaking above the Inner Downtrend Line in August.
USD CHF - SHARP RALLY TO TREND LINE
Within this context, a short trade on the EURO USD could have been opened using the most recent bearish signals on the Daily and 4 Hour Charts. The Daily Chart had already broken a Counter Trend Line (CTL), while the 4 Hour Chart followed up with a bearish breakout from a Pennant.
DAILY CHART
4 HOUR CHART
Entry took place after the breakout, with the Stop Loss set above the Resistance of the Pennant. As you can see here, additional entry points were also possible to add to that position. The inversely correlated USD CHF provided a similar Pennant breakout setup on its 4H Chart.
4 HOUR CHART
The Stop Loss was placed below the Support with the target set for that major Trend Line target. After 7 day patient days, the target was finally hit.
DAILY CHART
For the EURO USD, however, the target at Support is likely to take a much longer time. With 150 Pips left in this trade, we could see this area hit by the end of the upcoming week.
DAILY CHART
The larger trends and setups on the Daily and 4 Hour Charts provide bigger profits with less volatility and trading stress relative to the Smaller Time Frames. Short-term reactions to important but inconsistent Economic reports have very little bearing on the main direction and targets of the larger charts. With the greater stability and clarity of these trends, Retail Traders can therefore hold on to profitable trades for a much longer period with greater confidence that their analysis and patience will be significantly rewarded.
MAIN TECHNICAL POINTS
- Counter Trend Lines - (SECTION 3 - CURRENCY PATTERNS & MARKET DIRECTION)
- Downtrend Lines - (SECTION 3 - CURRENCY PATTERNS & MARKET DIRECTION)
- Breakouts - (SECTION 4 - MARKET DYNAMICS - TRENDS & CONSOLIDATION)
- Stop Loss Placements - (SECTION 6 - TRADING PLAN - EXIT & ENTRY RULES)
- Weekly Ranges - (SECTION 3 - CURRENCY PATTERNS & MARKET DIRECTION)
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Duane Shepherd
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING
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