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Today is the biggest trading day of the month and we are only on the 6th. Of course, today is the day the market gets the release of the Labor Department’s Non Farm Payrolls report, the single most watched and focused on economic news event of the month. After a few months hover at or above the critical 200k level, the NFP is now expected to show a result of 188k new jobs added to the US economy in November. While not a bad figure, it’s below 200. The significance of a figure below 200 is very far reaching.

NFP today with binary options 7-12-2013

Binary options traders across the world are probably aware of the current worry in the market surrounding this figure; it’s the gauge chosen by the US’s Federal Reserve to measure whether the market is growing fast enough or not for the purpose of reducing the quantitative easing (QE3). This tapering, as it’s called, of the 85 billion per month bond buy-back program hangs in the balance. And when 85 billion hang in the balance, you can bet your house that the market is paying attention. This is why the NFP is such an important event. The issue here is what the market will do given a few possible scenarios:

Scenario 1: NFP Payrolls comes in at expectations of 188k
In this case, with the EUR/USD currently hovering near 1.3560, after climbing for the last 48 hours virtually unimpeded, the forex pair may find itself heading down. The reason is, a tapering of the Federal Reserve’s policy means an increase in the value of the USD as the actually policy in itself is a form of inflation creation. By reducing the inflationary pressures on the USD, the value of the USD appreciates. As such, the immediate effect of a result in or around 188k will likely be a USD appreciation. But in this case, don’t expect a massive movement in the markets. However, do note that any information surrounding the release, like the unemployment rate itself, could certainly change this outlook and as such, the picture needs to be viewed by you the trader in real time.

Scenario 2: The NFP is above 188k
A better than expected reading basically means that the Fed will taper and taper sooner than later. This is good news for the USD, good news for the US economy, but likely will cause an initial drop in stock prices. However, expect those too to rebound quickly. The reason for the drop of the stocks is that they have come to rely on the Fed’s current policy and a tapering just means less means of continuing the rally in the markets. Stock prices might be positively effected if the actual result blasts past 200k This would be deemed, at that point, a fundamentally stronger US economy that even the most short sighted won’t be able to turn their backs on.

Scenario 3: The NFP is below 188k
Believe it or not, this is the trickiest of the scenarios and hardest to predict. After all, this would be considered bad news. However, this bad news would mean that the Fed would certainly be unable to taper the current round of quantitative easing, and probably no time soon. But bad news is bad news. And with this case, we may see an increase in the USD and a drop in stock prices.

Binary options traders; be ready for a massive trading day !

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
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