Forex Traders Say “Now What” after Jobs Data Report

Forex Traders appeared to be saying “now what” based on theway the currency markets traders on Friday after the release of the U.S.Non-Farm Payrolls Report. Instead of saying “now what”, they should be saying“how much” as in how much will the Fed ante up to stop the U.S. economyfrom completely derailing?

Forex Traders appeared to be saying “now what” based on theway the currency markets traders on Friday after the release of the U.S.Non-Farm Payrolls Report. Instead of saying “now what”, they should be saying“how much” as in how much will the Fed ante up to stop the U.S. economyfrom completely derailing?

While today’s employment data didn’t actually surpriseanyone, it did show that the jobs outlook is still bleak. Since the U.S. Dollarwas driven into the ground this week, it is clear that traders were alreadypricing this report into the market. The pause in the trend on Thursday and thehesitation moves on Friday could be indicating that traders are now thirstingfor more information. This information is how much is the Fed willing to pumpinto the economy, how they are going to do it and where is the money going togo?

The phrase “shock and awe” hit the markets late this week.Some traders believe the Fed is going to attempt to stimulate the economy inone fell swoop. In other words, if they commit a trillion dollars toquantitative easing, then do it all at one time. Others expect the Fed to tellthe market how much they are committing then announce that it will be spreadout over a period of time. A third option may be to tell the market the amountthen pledge to take a “watch and see” approach as they bleed small amounts ofcash into the markets. One thing the Fed doesn’t want to do is short change theeconomy at this time.

After completing a Fibonacci retracement of the 1.5144 to1.1876 range at 1.3896 and actually trading through the level, the EUR USD’supside momentum has slowed down. On Thursday it came close to posting a closingprice reversal top which would have caught the eye of top-pickers, instead thebreak sort of whimpered indicating the bulls are still in control.

If selling pressure is to begin then there is no betterplace than between the Fib level at 1.3896 and the psychological 1.4000 level.I said selling pressure because I don’t believe there will be aggressiveshorting. I also feel that smart money is already long and isn’t too excitedabout piling on new positions this deep in the uptrend. This means that bigmoney may decide to pare their positions enough to scare the weaker longs andthose late to the party, out of the market.

The funny thing about trends is they seem to be the easiestto trade but with each passing day the trader in the trend has this fear thatthe trend will end and he will have to give back some of his hard earnedprofits. Others want to be extremely “disciplined” and ride the trend until itchanges. Still others who missed the trend can’t seem to wait to play thereversal. I guess this is what makes the market.

Remember just a few months ago when analysts were talkingabout the demise of the Euro. Some traders were saying at that time thatinstitutions and hedge funds were never going to stop pressing this marketlower. The downtrend in the Euro at that time was being fueled by an event or aseries of events. Those tend to have shorter cycles. Currently the EUR USD isbeing driven by a policy. The current weak Dollar policy instigated by the Fedand blessed by the Treasury could be with us for a long time.

Technically, if 1.4028 is the top of this swing, thenaggressive traders can start looking for a 50% retracement of the rally from1.2644. This makes 1.3336 a potential downside target.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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