Some traders don’t trade through major data releases. Their reasoning is often that the numbers are simply a roll of the dice, and the potential risks equal or outweigh the potential profits. I disagree.
It’s not just a question of timidity. Trading platforms are becoming more sophisticated, and there are tools that traders can utilise to reduce their risk. We’re talking guaranteed stop loss orders here folks. In my view, potential large post release moves at a guaranteed risk level is worth a small premium, especially where a trader forms a non-consensus view.
Which brings us to non-farm payrolls today. In my opinion the market is underestimating the growth in the US economy. Yes, GDP was weaker than hoped. However, employment is strong and weak productivity could explain the difference. Importantly core inflation is bubbling higher, standing above the Fed’s target rate at 2.3%. A read well above the consensus of 205,000 is a real possibility.
The market reaction is likely straight forward. More jobs equals rates higher sooner equals a higher USD. And here’s my preferred play:
The four-hourly chart is respecting support around 112. I’m a buyer at current market, but I want to give this trade some room. I place a guaranteed stop loss order at 111.45, looking for a move higher on a strong NFP to a target around 113.60.