Price action in the currency markets after a key report is released can make things more confusing than normal.  Today we get a peek at the U.S. non-farm payrolls—it’s a biggie in the world of economic reports because job strength of weakness is key to economic growth, interest rate forecasts, etc.  One month of data doesn’t make a trend, but you wouldn’t know that if watched the fireworks we usually see in currencies after these reports are released.

Trying to predict market reactions on key reports is a crap shoot.  Here is a basic example of what I mean:

What if we get a lousy jobs report today?  Does the dollar fall? Conventional wisdom would suggest yes.  But there is a chance it could rally instead if the market “perceives” a bad jobs report a “certain” way.  Here’s what I mean…

If we get a bad jobs report, maybe the market starts thinking more about Mr. Alan Greenspan’s last salvos regarding the potential or probable U.S. recession.  And if one starts think of recession, one then thinks about lower corporate earnings and consumer spending.  One then sells stocks and possibly commodities.  And maybe this generates enough “risk concern” to shake up the major funds that have proven they are too exposed to debt.  Thus, the old risk-reduction trade would be back i.e. sell stuff to raise cash. 

And the dollar—it rallies on risk as a safe haven play.  And thus, the action in the dollar proves counter to conventional wisdom. 

If you are creative, you can build lots of different scenarios in your head—and most would be plausible.  Thus, it's why trading in front of, or soon after, a key report can be hazardous to your account’s health.