The EUR/USD pair rose during the session after initially falling on Wednesday, bouncing off the 1.35 handle again. The market actually broke above the top of the shooting star for the Tuesday session, which of course shows that the market is certainly looking to go higher. This was predicated mainly upon the fact that the ADP jobs report came out weaker than anticipated in the United States. Remember, the market is wondering whether or not the Federal Reserve will be able to taper off of quantitative easing anytime soon, and they also know that the Federal Reserve is concerned about the employment picture in the United States. The theory is now that with a week employment market, it’s almost impossible for the Federal Reserve to do anything in the meantime. This of course is dollar negative, and with the Europeans exiting recession it makes sense of the Euro would continue to appreciate.
That being said, the ADP report isn’t necessarily accurate in its prediction of the nonfarm payroll number. Is because of that that we are not overly excited by this move, and recognize the fact that the markets may be in for a bit of a surprise. Even though the Wednesday candle was fairly strong, it would not surprise us at all to see this market do very little before the nonfarm payroll report comes out and 830 in the morning on Friday Eastern Standard Time.
Because of this, we are on the sidelines but we do recognize the fact that the market certainly has an upward bias when it comes to this particular pair. Having said that, we think that the volatility between now and nonfarm payroll Friday is probably going to be a bit too much for the average trader to stomach and quite frankly the risk of the markets doing nothing is much higher than the risk of them doing something that you can hang onto for any great length of time. Remember, any time you place a trade before and economic announcement, you are essentially gambling on a result that you don’t know.
Written by FX Empire