News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The Nasdaq 100 index is aiming to breach a key resistance level at 14,950 for a second time. A successful attempt may open the door to further gains, although the MACD indicator flags signs of weakness. Get your equities forecast from @margaretyjy here: https://t.co/BEYupi32qB https://t.co/PWeXE8tZVY
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/t34kotPE8R
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/lM1OIJdjhr
  • Trading Forex is not a shortcut to instant wealth, excessive leverage can magnify losses, and sentiment is a powerful indicator. Learn about these principles in depth here: https://t.co/lZFM8youtX https://t.co/6qGEVjDlN6
  • Although the medium-term outlook remains negative, Bitcoin could make a bullish move in the coming days if prices manage to hold above key support in the $29,150/28,600 region. Get your #Bitcoin forecast from @DColmanFX here: https://t.co/T7iAD0fbbU https://t.co/xVSG7nKIQG
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here: https://t.co/IsnpfJhp91 https://t.co/HGWZikGQAa
  • Brush up your knowledge on trade-wars with this tool from DailyFX research briefly outlining trade-war history dating back to the early 1900s here: https://t.co/bZEFtp8kFe https://t.co/2cQ0JgAfh7
  • Crude oil prices collapsed on Monday despite an OPEC+ breakthrough, driven by Covid-induced demand woes. Meanwhile, Gold is at odds with a stronger US Dollar and falling Treasury yields. Get your #crudeoil market update from @FxWestwater here:https://t.co/H1vmag8d1k https://t.co/1zuPdKUmyE
  • AUD/USD is likely to face increased volatility over the coming days as it faces a batch of key event risks going into the end of July. Get your Australian Dollar forecast from @DavidJSong here: https://t.co/qFpg0DCxxL https://t.co/quQxg4WBy3
  • The US Dollar outlook against ASEAN currencies like the Singapore Dollar, Thai Baht, Indonesian Rupiah and Philippine Peso remains bullish amid capital outflows risks as Covid cases swell. Get your market update from @ddubrovskyFX here:https://t.co/vRUVxvQP8o https://t.co/cUEkW9BfIP
NFP: Nonfarm Payrolls Drives the US Dollar & Forex Volatility

NFP: Nonfarm Payrolls Drives the US Dollar & Forex Volatility

Rich Dvorak, Analyst

HOW NONFARM PAYROLLS (NFP) IMPACTS THE US DOLLAR & USD PRICE VOLATILITY

  • The US Dollar typically exhibits heightened volatility around the monthly release of nonfarm payrolls data and places USD price action at risk of experiencing outsized moves
  • Realized volatility in the US Dollar Index and its major currency pairs around NFP reports tends to run above-average as forex traders reassess the US economy and jobs market
  • Read more on Trading the NFP Report or check out this insight on the Federal Reserve for details on how nonfarm payrolls data can impact FOMC interest rate decisions

Currency volatility, which is characterized by the frequency and magnitude of changes in a currency’s value, tends to rise during times of heightened market uncertainty. The periodical release of US jobs data – like nonfarm payrolls – in addition to several other high-impact economic reports have historically served as primary catalysts for heightened market activity.

Read More – NFP Preview: US Dollar, Fed Rate Cuts Hinge on Jobs Data Due

Referred to less formally as NFP or NFPs, monthly nonfarm payrolls data is published on the first Friday of each month at 8:30 AM EST by the Bureau of Labor Statistics (BLS). This closely watched jobs report provides market participants with a detailed summary of the employment situation and broader labor market conditions across the United States.

US DOLLAR VOLATILITY TYPICALLY ELEVATED IN RESPONSE TO THE MONTHLY NFP REPORT (CHART 1)

NFP Nonfarm Payrolls US Dollar Index Price Chart

In consideration of the Federal Reserve (Fed) and its stated dual-mandate of price stability and full employment, it may come as little surprise that the monthly NFP report frequently sparks a violent reaction across several assets including the US Dollar, gold, equities and many others.

This is seeing that heavy-hitting jobs data has serious potential to sway market expectations regarding future changes in Fed monetary policy and influence on benchmark interest rates set by the FOMC.

That said, realized volatility in the DXY US Dollar Index in the wake of NFP data releases is frequently higher when compared to normal market conditions (i.e. median 20-day ATR) and trading activity observed over the preceding month (i.e. actual 20-day ATR), which is illustrated in chart 1 above.

NONFARM PAYROLLS DATA TENDS TO SPARK VOLATILITY IN THE US DOLLAR AND MAJOR USD CURRENCY PAIRS (CHART 2)

USD Price Chart US Dollar Forex Volatility Nonfarm Payrolls Jobs Report

This concept of hyperactivity in the US Dollar around nonfarm payrolls is also observed across major USD currency pairs. In fact, the daily trading range recorded by the DXY Index on NFP day exceeds its 5-day average true range 73% of the time.

Similarly, EUR/USD price action tops its respective 5-day ATR in response to nonfarm payrolls 64% of the time while USD/JPY exceeds it 68% of the time. On another note, volatility observed in the US Dollar roughly mirrors the NFP surprise magnitude.

US DOLLAR VOLATILITY GENERALLY DEPENDS ON SIZE OF NFP SURPRISE (CHART 3)

DXY Index Price Chart Nonfarm Payrolls

This means the greater the difference between actual results and forecast estimates (in absolute value terms), the more likely the DXY Index and its components will experience elevated measures of volatility.

Intraday swings in USD price action grows increasingly volatile – particularly with respect to its 5-day ATR – as the size of NFP surprises expands.US Dollar volatility is less prominent when the headline change in nonfarm payrolls falls roughly in-line with the market estimates (i.e. low NFP surprise).

For example, if the median economist consensus is expecting the headline change in nonfarm payrolls to cross the wires at +150K but the actual reading come in at -20K jobs (i.e. NFP surprise = |170K|), there is a 73.3% probability that the DXY Index range will exceed its relative 5-day ATR.

If markets are expecting a print of +100K but +120K is actually reported (i.e. NFP surprise = |30K|), there is a 49.5% probability that the DXY Index range will be less than its respective 5-day ATR.

NFP HISTORICAL DATA SURPRISE DISTRIBUTION FREQUENCY (CHART 4)

NFP Nonfarm Payrolls Historical Data Chart

Nevertheless, the frequency of occurrence falls as the absolute value NFP surprise widens according to historical data since June 1998. In other words, there is a 41.2% statistical probability that the headline change in nonfarm payrolls is reported within a +/- 37.5K surprise band relative to market expectations.

Likewise, there is a 5.9% statistical probability that actual NFP data will be reported within a +/- 75.0K to 112.5K surprise band. Furthermore, there is a rough positive relationship between the directional surprise in NFP data and the US Dollar.

US DOLLAR PERFORMANCE IN RESPONSE TO NONFARM PAYROLLS DATA (CHART 5)

US Dollar Historical Performance Chart Nonfarm Payrolls NFP

While it might not always be the case, a better-than-expected reading on nonfarm payrolls is generally associated with higher spot USD prices (and vise-versa). At the same time, the magnitude of performance in the Greenback roughly mirrors the degree of the NFP surprise.

For instance, the DXY Index notched a -1.61% decline on June 03, 2016 after the -122K surprise miss revealed in the period’s NFP report, but the US Dollar recorded a more palatable -1.11% drop when nonfarm payrolls data reported on May 03, 2002 missed estimates by a less disappointing -15K jobs.

On the other hand, the May 06, 2011 NFP report beat expectations by +59K jobs and saw the US Dollar rise by 0.87% in response while the May 07, 2004 release surprised by +118K and drove the DXY Index 1.38% higher.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES