If you are into FX trading, you should have heard of the non-farm payroll (NFP) report. This report is released on the first Friday of every month and it presents statistics indicating the total number of paid employees in US except those working in farms, government, private households or non-profit organizations. As such, the NFP report is seen as a direct reflection of the US economy as well as a forecast for future consumer spending since the buying power of people is directly linked to their earning ability. With such significance, the NFP report release often sets off huge movement in the FX market as the strength of greenbacks is directly related to the performance of the US economy.

The 2015 January NFP report was released one week ago on 6 Feb (Friday) at 9.30 pm Singapore time. After reviewing the price movement data on previous NFP data, I realized that the news release can set off a strong movement of up to 100 pips in one direction. As such, I decided to use a straddle trade strategy to capture this movement on the USDJPY pair. Using a 5-min chart (Figure 1 shows a 3-min chart to better display the price movements), I identified a resistance level at 117.37 region and a support level at 117.20 region. Next, I placed a buy stop order and a sell stop order simultaneously at 117.62 and 116.95 respectively, 25 pips above and below the support and resistance level identified. The stop loss was set at 15 pips below/above the pending orders as seen in Figure 1. Upon release of NFP report, the price broke out upwards by as much as 93 pips within a short 3-minute time period as seen in the long bullish candle below as US economy performed better in January 2015 as it added more jobs than expected. However, as I set my risk-to-reward ratio at 1:2, the order was closed at 117.90.

However, I do realize the risk of straddle trading as there are always chances of pending orders being wrongly triggered by whipsaws. That is why I set my pending orders as far as 25 pips away from the current support and resistance to reduce this risk.