It has been just about as boring trading day as it gets, outside of holidays. Today’s action was characterized by lack of trends and pathetic ranges. Markets are clearly waiting for a catalyst to spur them on, and most likely, that is the Non-Farm Payroll report, due on Friday. With generally positive economic data released so far this week, everybody is watching if this improvement is confirmed by job market. The consensus is, however, calling for a net loss of 100K jobs.

If there is a variation from expectations, markets are likely to respond strongly. I’m not going to bother with predictions about possible direction – that will be decided by the markets. However, if conditions remain relatively calm leading to the announcement, the volatility is almost certain increase, maybe dramatically. That means that currencies could move substantially before the Labor Day weekend, maybe as much as 100-200 pips, depending on which pair.

If the moves take place, chances are they will break through today’s highs/lows, so those would be levels to watch for possible trade entries. Also, most other recent supports/resistances should serve the same purpose. Another approach is to wait for an hour after announcement and then open positions above/below the latest hourly candle. Should the moves be serious, they will continue in the original direction. However, if the aftermath of announcement is just noise, markets will likely retreat about an hour later, so no trades will be taken. One can chose just about any pair – the USD, JPY, CHF, AUD will all be effected, if the numbers are not very close to forecast.

What to do before the NFP? One could just wait it out, be patient. I want to get active on short time frames aiming for small pips. The snapshot above showns 15M chart of AUD-USD, which in a proces of building a potential H&S. There are at least three distinctive trading set ups here, and similar price behavior can be found all over the place. Of course objectives would be small, too, in a range of 20-25 pips. However, the NFP should provide the biggest moves of the day.

Mike K.