What Are Non-Farm Payrolls and What are the Effects on Forex Trading?
Non-Farm Payroll or often abbreviated as NFP is a report that is useful to measure the growth of employment outside the agricultural, entrepreneurship, domestic work and military sectors. The agency that announced this information was the US Bureau of Labor Statistics along with a report on the unemployment rate.
The NFP report will be reported every Friday on each month and this report will display the data on changes in the number of workers outside the sector that we have stated above. NFP data is often used to measure the health level of a country’s economy.
NFP data is information that traders are eagerly awaiting, because this information makes a very significant price spike and this is the best step to get significant profits.
This information is very important because of its very strong influence on the creation of employment opportunities that are useful for measuring the level of existing consumer spending. NFP can also reflect the latest conditions of the United States industrial and trade sector as a whole.
Thus when the NFP value is high, then this can be said to be also higher economic growth in the United States.
Viewing NFP Support Data
As we said above that NFP is a very important indicator because this data will affect the economy as a whole. NFP data can also help the Fed to assess the labor market in the United States and also business conditions related to many companies and industries. This is behind the Fed’s special attention regarding the release of NFP news.
Institutions that are under the auspices of the Fed, FOMC, set interest rate policies and also credit. With this, FOMS is one of the fundamental information that forex traders are waiting for.
The FOMC will make a meeting 8 times a year discussing changes in monetary policy and one of the things that becomes a decision indicator is NFP data.
2 Data Affecting NFP Data
Then there are 2 data that affect the release of NFP data, namely Unemployment Claims and ADP Non-Farm Employment Change.
Unemployment Claims is a data that collects the number of people who did not succeed in getting unemployment insurance for the first time until 1 week before the data was released. The impact of this data is when the Unemployment Claims increase in number, the currency will also weaken.
ADP Non-Farm Employment Change is data about changes in the number of people employed in the previous month and does not include the government sector and the agricultural industry.
What Do Traders Need to Do When Approaching NFP Release?
We have explained in the previous discussion that the release of NFP news is information that is highly awaited by traders around the world. This is because NFP data is a great opportunity to get the maximum profit in trading.
Most traders who are waiting for news releases will focus on computers and start installing lots of pending orders to prepare for the various possibilities that occur.
The above thing you don’t really need to do, because you don’t make NFP data as an excessive concern in trading. In fact, it is not uncommon for NFP data that has been released to panic many investors because of very high volatility.
The Way You Can Do
The advice we can provide for you is that it is best to trade in the morning or afternoon, this is because not infrequently when the news is released, the price does not move until near the release of the data. When this time happens, you can start looking for all references regarding NFP data leaks from various sources.
Then you can start trading 1 to ½ hours before the news release and start installing pending orders at prices that you have previously estimated.
As a trader, you must be careful with this data, because not infrequently during news releases, prices experience a very fast movement and traders often get unwanted prices. One more thing, don’t forget to install Stop Loss so that your losses can be limited.
Effect of NFP on Forex Trading
As a forex trader, it is only natural that you continue to look for economic indicators that are useful as a guide to the direction of a country’s economy.Besides using NFP, traders also use and monitor the Consumer Price Index (CPI), housing data, Gross Domestic Product (GDP), and so on.
NFP data is the same as other economic data, namely the difference between actual data and estimates that will determine the effect of data on market movements. When NFP data starts to increase, this can be an indication that the US economy is very high and fast. This information can also be an indication that the inflation rate will also increase.
In forex trading, actual numbers and estimated NFP numbers are considered serious. So when the published NFP data is higher than expected, the money market speculators will buy USD and this will make the USD value strengthen.The opposite thing also happens if the NFP data is lower than expected.
Well, this upward movement in the USD makes many parties use to gain profits in trading. Many traders use various techniques to get these benefits.
NFP data is a highly awaited data for traders in the world, because the release of the data will greatly affect the United States economy and become an opportunity for them to get greater profits in transactions.
Even though it is likely to be profitable, NFP data does not always move in accordance with the expectations of traders. There are times when the data is contradicted with predictions and the direction of currency movements is not in accordance with predictions.
If you still have questions related to the information above, do not hesitate to ask us through the comments column below. We will be happy to answer every question that comes in to increase your knowledge.
Don’t forget to share this article through social media so that more people will know the effect of NFP data on forex trading.
Hopefully the information we convey above can help you all.