Just a brief post going into the NFP data release in 70 minutes.
EUR/USD has been in a very small range since yesterday afternoon; the coil is being wound up and getting ready to spring. I was thinking this morning that it has been a while since any talking head has had anything but a long bias towards EUR/USD. Nobody says that being short is a good idea. I seem to be one of the last commentators to side with the Long EUR/USD crowd when we turned our outlook positive on July 20 and put on our long position July 30.
So the concern is that no one is short. No one is out there worried about covering a short position if EUR/USD gaps higher after the data release. No one will be desperate to buy back their EUR/USD position regardless of price. There will be no Dealing Desk Managers shouting at their dealing team to “Lift every Offer You See!!”
Conversely, if EUR/USD starts to tumble after the data release, there are a lot of long EUR/USD positions that got to the party late and are barely above (or maybe below) their entry point. These are the players that may be spooked easily by a drop in EUR/USD. And remember the biggest short-term players in this market (large dealing desks) need transactions to make money. Their goal is to drive the market into action.
So without commenting on the actual data release (estimates range from -150k to -475k jobs)we focus on the market action and will lighten up our position before the data release this morning. If we are right with our call for a 1.47xx handle sometime in the next 5 weeks, then there is still a lot of room on the upside to participate and re-enter our full long position.
Stay Nimble!
Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com
