The rational behind this strategy is very simple: A news release like NFP should only affect the USD. But more often than not one can see major whipsaws on pairs that do not contain the USD. By fading these spikes we are actually 'protecting' these crosses from the (non) news event.
Here is the setup: Preferrably trade a cross with a good range/spread ratio. Just before the news open a minute chart and add a 60 period SMA as a point of reference. The price should be close to the SMA and not rallying. Because we don't know how big the whipsaw / spike will be, and in what direction, just setup several limit orders in a range above and below the SMA with profit target the SMA. That's it! Just wait and cash the pips as the rest of the market is caring for the USD majors and the banks computers can't arbitrage away the effects on the crosses fast enough.
This is how some popular crosses reacted to todays NFP:
It should also work with AUD, NZD,... but the spread is a little larger.
http://img404.imageshack.us/img404/4...crossesmi0.gif
Here is the setup: Preferrably trade a cross with a good range/spread ratio. Just before the news open a minute chart and add a 60 period SMA as a point of reference. The price should be close to the SMA and not rallying. Because we don't know how big the whipsaw / spike will be, and in what direction, just setup several limit orders in a range above and below the SMA with profit target the SMA. That's it! Just wait and cash the pips as the rest of the market is caring for the USD majors and the banks computers can't arbitrage away the effects on the crosses fast enough.
This is how some popular crosses reacted to todays NFP:
It should also work with AUD, NZD,... but the spread is a little larger.
http://img404.imageshack.us/img404/4...crossesmi0.gif