The Non-Farm Payrolls is one of the most watched and highly anticipated reports on the US economic calendar. Non-Farm Payrolls will be abbreviated within as NFP and is released on a monthly basis to give a timely glimpse into employment inside of the United States. These numbers are released by the U.S Bureau of Labor Statistics to assist policy makers with decisions regarding monetary policy.
NFP looks specifically at net changes in employment as jobs are created or subtracted in an economy in any given month. The term Non-Farm is used since farm / agricultural workers are not included in the employment count. The decision to not include agricultural jobs lies in these jobs being largely seasonal that could possibly produce small temporary shifts in labor reporting. For this reason certain government employees, private household employees and nonprofit organization are also not included in the count.
As the most comprehensive employment number released in the United States, the results have been known to produce volatility in the Forex Market. The next NFP announcement is set to take place this Friday March 9th at 8:30 am New York time, and it makes sense as a trader to be prepared for unexpected volatility. Below we can see a 5minute chart of the EUR/USD. This snapshot is taken after the February 3rd NFP announcement. Last month it was released that 243,000 new jobs were added to the economy which was considerably more than the 150k predicted. This caused the EUR/USD spiked 40 pips and printed a daily high at 1.3204. Less than an hour later the EUR/USD had moved 139 pips lower to 1.3065.
With expectations of 210,000 new jobs being added to the economy this report; traders need to be ready if numbers do not come out in line with expectations. Traditionally there are many ways of trading the news including breakouts , news fades , and trading market dips . Trading NFP can be an exciting and often profitable pursuit for traders willing to enter into a volatile market. Regardless of the strategy taken, it is always important to keep an eye on risk / reward levels while minimizing the use of leverage in case volatility spikes against your trade. For a comprehensive look at trading NFP , join me LIVE inside of the DailyFX Plus Live Classroom at 9:00 am Friday morning for more details.
---Written by Walker England, Trading Instructor
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