The Monthly Market Mover - NFP
As the most comprehensive employment number released in the United States, the change in Non-Farm Payrolls is one of the most highly anticipated reports on the US economic calendar. Non-Farm Payrolls, abbreviated within as NFP, is released on a monthly basis to give a timely glimpse into employment inside of the United States. This news release is historically known for its volatility, as policy makers such as the Fed look to employment numbers to influence their decisions regarding monetary policy.
Below you will see a chart displaying the historic results of NFP. This month, expectations are set for the creation of 90,000 new jobs outside of the agricultural sector.
The next NFP announcement is set to take place this Friday July 6th at 8:30 am New York time, and it makes sense as a trader to be prepared for unexpected volatility. To get an idea of possible strategies for the event, we can reflect on last month’s price action. Below you will see a 5minute chart of the EURJPY captured after the June 1st NFP announcement. Last month it was announced that 69,000 new jobs were added to the economy which was considerably less than the 150k predicted. This caused the EUR/JPY to immediately spike 60 pips lower and printed a daily high at 95.56. Less than fifteen minutes later the EUR/JPY had moved 139 pips higher to 96.84.
As you can see, NFP can drive markets in more than one direction in a very short period of time. Often it is advisable for traders to wait a minimum of 15 minutes prior to taking a course of action. At that point entries can be set above and below the NFP swing high and low using an OCO order. This way, when price breaks to a new daily low or high, we are prepared to enter into the market. Stop orders can be set inside of the NFP trading range in accordance to your personal risk tolerance. When using this breakout strategy, it is also advisable to use at minimum 1:2 Risk/Reward ratio.
For a more 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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