The NFP (Non-Farm Payrolls) is released one day earlier this week, meaning Thursday and not Friday due to the 4th of July holiday in the United States.
As usual, the NFP week is characterized with low levels of volatility until the actual numbers are revealed, with USDJPY making a steady grind higher right into the release, and then the decisive move is yet to come.
However, this week has been a bit different from a normal NFP week thus far and is likely to stay this way right into the end of it. While in the United States on Friday there will be few active traders, Europe is open as normal.
There are two reasons why this week should turn out to be different than a regular NFP week: first of all, we opened with a gap this Monday, and markets are always trying to fill those gaps as soon as possible and second, Greece situation is critical as a vital referendum is going to be held on Sunday, 5th of July.
The news late last Friday was that Prime Minister Tsipras is calling for a referendum on the bailout terms Greece’s creditors are proposing. This made the market open with huge gaps to the downside as all Euro related pairs gaped lower dragging risk-off too, so USDJPY followed.
Euro pairs closed the gaps on the same day but the USDJPY did not. That is going to be a prompt for algorithmic trading, or the robots, into the NFP release this Thursday.
Expect the NFP to bring the usual volatility but then, by the time North American traders are going home, the price should not really move until London opens.
By the time London prepares to close the day on Friday, traders will face a huge dilemma: try to face the outcome of a Greek referendum with open positions or close the vast majority of them.
My take on the subject is pretty simple as I would not touch any Euro related pair until after the referendum. The risks are simply too big to carry Euro positions over the weekend. We all remember what happened when the SNB dropped the floor on the EURCHF – many traders AND brokers went bust…
Speaking of brokers, many are already sending email alerts saying that margins are going to increase for Euro related pairs over the weekend. This is a clear warning the FX market is preparing for extreme volatility.
If you, as a trader, insist on trading something, then USDCAD and GBP pairs would be just fine as even in the case of a seismic shock across the dashboard, changes there should be minimal.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
