Trading the NFP…

There are a number of significant fundamental risks in the market currently and the Non-farm Payroll (NFP) is one of these. The NFP is the monthly change in employment excluding the farming sector. It is considered the most holistic measure of job creation in the US, which makes it the most closely watched indicator as regards to the employment situation of the US economy. Such a distinction makes the NFP figure highly significant, given the importance of labor to the US economy. A surge in NFP suggests rising employment and potential inflation pressures, which the Fed often counters with rate hikes. Conversely, a decline in NFP suggests a slowing economy, which makes a decline in rates more likely.

The NFP is set to be released at 13:30 GMT today.

A smart way is to trade the NFP is to brace for both possibilities – A better-than-expected job report (i.e. a strong USDollar) or a worse-than-expected job (i.e. a weak dollar).

STRONG DOLLAR

We would look to buy the dollar in instruments where the counter currency is relative weak. These include:

  • USD/JPY
  • USD/CHF

WEAK DOLLAR

Here, we would sell the dollar where the counter currency is relatively strong. This includes:

  • USD/CAD (current strength of the CAD could be significantly affected by its monthly employment rate also due at 13:30 GMT today)

Another possible scenario, is a mixed reaction to job data printed and currencies in this mix include:

  • AUD/USD
  • NZD/USD
  • GBP/USD
  • EUR/USD

 N.B: It should be worthy of noting that the NFP data print can bring a significant level of volatility to the markets. So, trading here is quite aggressive and requires a certain risk threshold. Good luck!

Traders are advised to always use a stop loss!!

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