Personally I don't think the news should be ignored.
That is not to say that you should blindly start trading every economic announcement that is released. How you think price should react and how the market actually reacts are usually two very different things.
At the same time, price action during news can often be hard to interpret with price making knee jerk reactions as traders jostle for position.
I remember one particular time, there was a surprise rate cut from the BoE and myself and the other currency trader on my desk went short Sterling only to see that after the initial sharp move down, the market made a major reversal, with Cable going parabolic.
Whilst we all scratched our heads at the bizarre reaction, the hacks will explain the move by telling you it was because traders interpreted the cut as a proactive stance from the BoE to help ease an ailing economy.
All hindsight of course.
Aligned with this point, I think that it is key to look at what price is actually doing. For example, is the market ignoring "good" or "bad" news? This can be indicative of an underlying strength or weakness.
With reference to your post above, if the payrolls came in at +750k then you should, under almost any normal circumstances, see risk go vertical. If it doesn't then something is big time wrong. I personally think you should have an "expectation" (e.g. that the market should rally) and then see how price reacts. Price is, after all, the sum opinion of all market participants. If it heads down on that number, I'm going to watch key support levels. If it's breaking them, retesting, heading lower, on a headline figure like that, I'm joining the offer fast.
This is of particular interest during major trends where sometimes the news can get overly positive or negative and more often than not this can actually mark major trend changes.
A a few examples ;
Wheat stock piles hit a 60 year low in February 2008. Then in late Feb, the market made an all time high and went into a bear market.
Hurricane Katrina hit the GoM in 2005. The press reported huge collateral damage with BP losing its Thunderhorse platform (didn't it float off somewhere?) and 30 oil platforms were damaged and 9 refineries were closed. With 24% of the annual production of oil not reaching market, Crude prices still plummeted over 20% in value.
Now, I am sure there are people out there (probably going to appear on this forum any minute) that can give us a fundamental reason (lets leave the technicals including strong hands using liquidity from weak longs to get short) WHY Wheat and Crude went down on these fundamentals. But the simple fact is that there were the main headines making the rounds at the time and that is what price did subsequently.
However, studying price doesn't always alert you to what might happen. If you take price analysis alone you might have been tempted to sell USD/JPY in March 2011 when the BoJ intervened in the Yen or September 2011 when the SNB intervened in the Swiss Franc. A study of historical price action will tell you that this is the right thing to do since these moves are quickly undone. However, only by listening to the news would you have known that the BoJ March intervention was not normal - infact it was co-ordinated CoB intervention. In the case of the SNB they actually pegged the currency to 1.20 which gave you a guarantee (or at least a good a one as you will ever get) that the currency is going to that price.
Actually in the last example, if you had been watching a news feed you would have had the opportunity of a lifetime. I don't remember the exact price the currency was at but I seem to recall it was around 1.13 (700 pips below the floor) when RAN sqwarked it. At the very least you wouldn't have stood infront of that move and got streamrolled.
