Breakfast Blog

Happy NFP Day Traders,
                                        This is the big jobs numbers day of the Month on the Data calendar and the first of 3 significant risk event coming up in the next few weeks that will give the Equity Markets and the Dollar direction.
First to recap on yesterday which saw the BOE leave rates unchanged and a decision to leave QE at its current rate when the market had priced in an extra £25 Billion a month. This caused a pop in cable from just under 1.50 to session highs of 1.508 but after that it was all down hill as it gradually grinded lower back to 1.5015 from an extremely strong dollar and traders using the spike in Sterling to initiate more short positions.
The ECB also left rates unchanged and Mario Draghi gave a more hawkish press conference then the market was expecting. This caused a Euro rally with the EUR/USD reaching 1.3120 from a low of 1.2990 during the meeting and now the EUR/JPY cross stands more then 250 pips higher then it was this time yesterday with some broad YEN weakness observed. After the Interest rate decisions yesterday the market started to price in some very good Non-Farm Payroll data and the USD/JPY major broke the 95 level for the first time since May 2010, it trades at 95.40 spot as I type.
This morning should be quiet ahead of this afternoons data but the American equity markets are already starting to price in a huge number with the Dow Jones 30 trading at the highest intra day level of all time as i type right now at 14394, and the S&P 500 now only 2% off the all time highs at 1576.
Generally the best way to play a strong non-farm payroll number is to sell gold and to sell a foreign currency against the Dollar, especially a weak currency like Sterling or the Yen as the Dollar strength will give maximum returns against a weak currency. The Equity play against a strong NFP number is more difficult as the market should rally but in the past strong numbers have been perceived as bad news because the Market thinks that QE will be be curtailed and as a result Equities have sold off after an additional spike higher. This could very well be the case today with a High Jobs number and a lower unemployment rate number. The more important is the Unemployment rate as this is directly linked to the Quantitative Easing program and with the FOMC coming up on Wednesday week (the second major risk event) a lot of traders may choose to take profit on any long Equity positions before this meeting.
The Data is at 13 30 GMT and we would advise not to have a position going into this as the market will spike violently and it is a recipe for getting stopped out, the best option is to wait for the direction a few minutes after before taking a position.
Good levels to sell rallies for Euro are 1.3120 and 1.3160. Cable a short anywhere near 1.5080 would be a high probability trade and Gold around 1590-1600 would provide a solid entry point for a short targeting the Years lows at 1550 and then 1525.
Good luck today and have a great weekend.
Lowkey