Have you heard of the US NFP or US Non Farm Payroll Report? Ever wondered how it affects your forex trading?
This is a significant economic data release event and has the potential to cause volatility in the forex market.
The US Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:
– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees
Besides employment data, it also leads to the computation of the unemployment rate. Estimates on the average work week and average weekly earnings of all non-farm employees are derived too.
As the US Non-Farm Payroll Report represents around 80% of the workers in the US, it is often used as a barometer of the US economy. Furthermore, employment and earnings ultimately affect the purchasing power of consumers which leads to retail sales. The bread and butter of an economy.
The US government uses this information to guide their economic policies. Many analysts and traders keenly observe US Non-Farm Payroll developments for insights on future monetary policies.
The US economy is the global leader and it’s influence spreads across all financial markets. Volatile moves of 100 or more pips within minutes have been known to happen, especially if there was an unexpected development of the report.
Find below a 1 min chart of a currency pair taken on a US Non-Farm Payroll Report release day from the moment of release to an hour later.
You can see that the broad range of price action could have easily taken out trades on both sides. After more than a decade of forex analysis, we are of the opinion that one should avoid trading during the US Non-Farm Payroll. If you are already in a trade position, it should be one that is planned for a medium or long term execution with proper risk and money management.
Readers who are subscribed to our premium analysis should refer to the US Non-Farm Payroll Analysis after each event to see how the major currency pairs fared against a better or worst than expected report. With the historical and colour shaded data, trends which can be leveraged upon such as a currency pair which mostly dips on worst than expected reports may be discovered.
US Non-Farm Payroll reports are usually released on the first Friday of every month.