Non-Farm Payrolls and the Pound

The monthly Non-Farm Payrolls makes the markets go crazy. Even in this  madness, some swing patterns can be identified and handled. While most currencies can swing back and forth, GBP/USD might fall and not come back.

1. But the rumor, sell the fact: This known traders’ saying also works in the forex markets. In some cases, specific expectations cause serious price action before the Non-Farm Payrolls release. The dollar can weaken significantly before the release, and then regain all the losses upon the release. This doesn’t have to be correlated with the real results.

2. Wrong  knee jerk  reaction: In other cases, the markets go in the wrong direction. Last month, on September 3rd, the dollar made serious gains against the Euro, only to lose these gains in a matter of two hours. Kathy Lien states :

Seven out of the last eight times non-farm payrolls were released, the knee jerk reaction was quickly erased. Even though the direction associated with these instances has not always been the same, we can see that the immediate reaction is usually not sustained, and eventually reversed into a more substantial move that lasted for the course of the trading day.

One currency to note is the British Pound. It has lost a lot in the past few weeks, and it’s in a very dangerous spot.

A knee-jerk reaction can send GBP/USD under the recent low of 1.5767. While other currencies can make the U-turn and get back up, I’m not sure the Pound can make it. Non-Farm Payrolls can ride on the weakness and push it below the bottom. I sure might be wrong, and the Pound could swing up to a comeback. But I’ve always been Pound-bearish…

The NFP is always fascinating to watch. I’ll closely follow the British Pound this time.