Interval: H4

It is well known that in this period Non-Farm Payrolls is one of the macroeconomic indicators that produces volatility in the market when is published, especially on EURUSD. Although it makes the market to move, it is not a very easy indicator to trade. There are a lot of interpretations like risk appetite or aversion (due to the economic crisis), classic reaction, or how FED will see the data.

ECB’s press conference are also important events that are watched carefully by investors. Even from the period of Jean Claude Trichet, but now also, during Mario Draghi’s mandate, this events moved the euro in higher or lower grounds, continued or reversed trends. At this conferences the investors are looking for different signals, like optimism or pessimism in the speaker’s tone, promises, future possible changes in the monetary policy etc.

We looked over the market reactions, on the EURUSD, from the beginning of this year and observed some interesting changes in the price action for both ECB Press Conference and the NFP(Non-Farm Payrolls) publication.

In January first was the NFP published with a value of 155k, better than expected which ended with a strengthening of the Euro of 140 pips (1.09%). Six days later the ECB’s press conference, and Mr. Mario Drahi’s speech sent Euro even higher, rallying 360 pips (2.77) to 1.34. This have happened because his tone was very optimist and all the economic data were in the positive territory, he was also expecting even better data in the second half of 2013.

The trend has continued up an touched a high in the same day with the February NFP publishing. This time it was under the expectation, published at 157k. This triggered indecision, and we can see this in the price action. A quite big spinning top was actually the candle that touched the top. A pretty aggressive don move started and until the ECB press conference on 7th February the price consolidated  in a symmetrical triangle. This time Draghi was not the optimist anymore, the data signaled a break in the advance of the economy and he reaffirmed that he is expecting better signals, later this year, and not in the second half. The euro started to drop and fell 200 pips (1.52%). This was actually the beginning of a new downtrend.

The latest events were the ECB’s press conference on 7th of March, that was first. Draghi didn’t have anything new to say, just a slight more optimism than in February and that was enough for the investors to buy the single currency, pushing it 140 pips higher. It didn’t go too far because the Non-Farm Payrolls that came the second day erased the earlier gains. It was way over what analyst were expecting, published at 263k.

As a conclusion we can say that the dollar is getting stronger on the labor market data. If the NFP will continue to come better and better it is possible that FED will think about making changes in the Quantitative Easing program, especially if the unemployment rate will drop lower, closing to 7%. On the other hand the Euro Zone will get back the investor’s confidence and the trend will be changed only when good economic data will start to show on the radar.

Investazor will update the chart and will comment on new releases about this theme next month after the two events.