NonFarm Payrolls is the most important economic news event for the US market.
The U.S. Nonfarm Payrolls and Unemployment Rate, or NFP for short, comes out the first Friday of each month at 7:30 am EST. Besides FOMC announcements, NFP is one of the most volatile economic news trading events of the month.
The NFP is released by the U.S. Department of Labor on the first Friday of each month, outlining changes in the number of employees, excluding farm workers and those employed by the government, non-profit organizations and private households.
The NFP release, per market consensus, is expected to show how many private sector corporate jobs the U.S. economy added or lost in the previous month. The markets closely watch the average hourly earnings figures as well.
If we see a significantly bad NFP release of less than expected added jobs, coupled with an Unemployment Rate more than expected, the markets will most likely see USD come under downward pressure.
A strong NFP release of greater than expected number of jobs added, with the Unemployment Rate % less than expected, will likely result in USD strengthening.
As always, it will be important to note any revision from the previous month as this will impact market sentiment regardless of the current release.
Keep in mind:
NonFarm Payrolls is an economic indicator that tends to trigger sharp market movements in the minutes leading up to its release and afterwards.
During the NFP announcement, expect high volatility, especially across USD pairs.
Market sentiment can really affect currency movements. What traders expect from the report has as much impact as the actual released data, if not greater.
A higher figure than the one registered during the previous month signifies an improvement in employment numbers. This, as well as the release of a higher-than-expected figure, mean an increase in the number of jobs created and are positive for both the U.S. economy and the dollar.
A lower figure than the one registered during the previous month, as well as a lower-than-expected figure, usually have a negative impact on the dollar as they demonstrate a drop in employment numbers.
How To Trade NonFarm Payrolls
Remember that the sudden spike observed across the charts of many currency pairs upon the release of the NFPs is usually followed by a period during which the market tries to recover and return to its initial price levels.
Some traders are afraid of trading NFP but if you learn how to read the charts for the US-related currency pairs, you can trade this red economic news event with relative ease and assurance by getting positioned hours or minutes before the news event.
Visit my other post to learn how to set up your Forex Factory Calendar for your timezone and to see only the red news events and how to trade them:
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