NFP surprise, USD weakness and employment theories

Conversely, lower NFP metrics signifies that the economy is slowing down. The USD tends to weaken and lose value if the NFP data released every month does not conform to the expectations of the market. So, before we go deeper into the analysis of NFP data just a word of caution for our readers. This is going to be a long and rambling post where we will also look at some of the academic literature regarding employment and the economy to make/clarify our argument. Hence in case you are in hurry please don’t say that the statutory warning was not provided.

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Leaving aside the arcane language what this means is that the wage should be commensurate to the portion of GDP which will be lost in case employment is reduced by one unit . Any economy which is below its maximum output can always Functional Testing gain by employing the marginal labour to increase the output. The total crypto market cap is estimated to be just a bit above the one trillion dollar mark. In early session it crossed the 61.80 mark and moved to 61.82 levels.

With a big announcement like NFP or an interest rate announcement, I will exit trades about 5 minutes before. The core retail sales data, which pertains to the U.S., is an economic indicator that shows the aggregate retail sales data. A high core retail sales data is favourable and can lead to an appreciation in the currency’s value. The consumer confidence index and the consumer sentiment index are both indicators of the feelings of consumers.

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In October, notable job gains occurred in health care , namely ambulatory health care services , nursing and residential care facilities , and hospitals ; professional and technical services . Australian central bank Interest Rate Decision, Statement, and press conference will be on Tuesday. No change is expected in its rates and monetary policy until a target inflation rate between 2 and 3% will be achieved. While from the Bank of England meeting on Thursday, we expect to lower the stimulus and ease on bond purchases level at its meeting as GBPUSD Outlook. Britain’s economy is strongly recovering from the worst recession of the past 300 years.

  • A worse off number could lead to correction in broader markets and rise in safe haven USD, which could result in lower gold prices.
  • The Average Weekly Hours for all employees on U.S. nonfarm payrolls remained unchanged at 34.5 hours in September, in line with market expectations.
  • He expects the positivity to continue for the rest of the session as well.
  • However, weakness in Equities could play a spoil sport for currency appreciation which if does should halt around 60.10 during the day.
  • Buyers emerged once again near $1690 as previously too we saw gold taking support around that level.

While treasure yields are also growing, the USD index due to grow above 91.20 level; however, technically, under 91.00 level, deeper numbers are expected to come into the spotlight. COMEX gold trades marginally higher near $1807/oz after a 0.3% decline yesterday. Gold trades higher supported by weaker US dollar, mixed economic numbers, inflation concerns and geopolitical risks. However, weighing on price is higher bond yields amid hawkish stance of major central banks.

Non-farm payroll data

Maybe the economy is weak and hence not enough jobs are getting created. New jobs are hard to come by when any economy is already working at its maximum output level. The other reason can be that the wages which are being offered for the newly created jobs are not enticing enough for the people apply and re-join the workforce. On Friday the most awaited data print i.e. the US NFP number came out.

The first one says that the jobs might not get created in case the economy is already back to a normal level. We know that is not the case as it is still under reopening, the total job numbers are still below pre pandemic levels. Still some positive GDP can be created if one new person comes into the workforce.

Overall, the U.S. labor market is still robust along with consumer spending, while inflation is substantially above the +2% targets. Thus Fed has no problem with further rate hikes to a positive real rate, at least wrt core inflation. The U.S. labor market as well as inflation may begin to cool after Q1CY23 amid lower demand and expected higher supply (?). Having reacted to ECB and BOE announcements, gold traders keep their eyes on the US monthly jobs report for January during early Friday. Given the latest negative surprise from the ADP Employment Change, today’s Nonfarm Payrolls becomes the key for gold prices as the metal seesaws around the 200-DMA, near $1,806 by the press time, ahead of the release.

The nominal number of the civilian labor force decreased by -57K in August to K against Feb’20 (pre-COVID) levels of K. The nominal number of unemployed persons was 5753K in September, decreased by -261K sequentially and still higher than Feb’20 (pre-COVID) levels of 5717K. Fed wants to see some slowdown in the job/labor market so that demand as-well-as inflation cools to some extent. The report provides fresh insight into the overall health of the U.S. economy and how the labor market is doing. The NFP is a part of the monthly Employment Situation Report that estimates the number of jobs gained in the U.S. in the previous month.

How many pips does NFP usually move?

The report causes a massive reshuffling in positions, and seeing a 75 to 100 pip move in the GBPUSD in the minutes and hours following the announcement is quite common. During volatile times, when overall movement is already quite high, the report can cause moves of 200 pips or more.

If the price moves above the high or low of the inside bar, the strategy is to take the trade right then. Trading the 1-minute generally provides multiple trades each day, whether around an NFP announcement or not. Exit existing trades at least 2 minutes before the NFP announcement.

Interest rate announcements

Since the NFP report is a widely-followed report, it doesn’t impact only the US dollar. Often, other currencies will also exhibit increased volatility right after the release of the NFP report. If the setup doesn’t return an attractive reward-to-risk ratio of at least one, don’t take the trade. In his presser on 21st September, Powell pointed out the positive real rate of interest wrt 1Y inflation expectations or core PCE inflation (rolling 3-month average), both of which are now around +4.8%; i.e. ~+5.0%. Fed will publish the next SEP on 14th Dec’22 and if core PCE inflation continues to move around +5.0%, then Fed may project at least a 50 bps rate hike by Jan-Mar’23. On the light economic calendar, Monday ISM Manufacturing PMI and New Orders, both expected to raise, and later on, the same day, Mr. Powellwill have speech.

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US 2 and 10 year yields are inverted by 35bps and 5 year/30 year by 5 basis point. In the near term, because of the Fed’s commitment of aggressive rate hike which is pushing US Treasury yield higher and US Dollar stronger, all asset classes are bearing the brunt of selling pressure. That’s why you should always pay attention to the complete report and read through all of its details classic pivot point formula before placing a trade based on the NFP. Familiarity with the wide variety of forex trading strategies may help traders adapt and improve their success rates in ever-changing market conditions. Non-farm payroll is critical news that hits the forex markets regularly. Let’s see how it affected USDCAD and USDJPY last time in order to be better prepared for the announcement in advance.

Profit from News Event Trading (NFP Special)Event Ended

As a central bank, Fed can only control the demand side of the economy so that it can match with the currently constrained supply side and bring inflation down to some extent. As per the establishment survey, the change in total nonfarm payroll employment for July was revised up by +11K to +537K, and the change for August was nil-remained at +315K. With these revisions, NFP employment in July and August combined was +11K higher than previously reported. The latest revised private NFP job additions for June, July, and August were around +1069K against the earlier reported figure of +1189K. The latest revised government NFP job additions for June, July, and August were around +76K against the earlier reported figure of +50K. Thus, private NFP jobs were revised down by -120K, while government NFP jobs were revised up by +26K for June, July and August.

nfp trading

In doing so, the yellow metal stays inside the bearish trend channel connecting levels marked since late April. That said, the latest pullback remains elusive until the quote remains beyond the aforementioned previous resistance line, around $1,685 at the latest. Gold prices were steady on February 4 in the international markets and are set for a weekly gain as a weaker dollar, concerns over stubborn inflation and tensions surrounding Ukraine lifted demand for the safe-haven bullion. Interest Rates – another lagging indicator that shows economic growth. Click the ‘Open account’button on our website and proceed to the Personal What is HugoFX Area.

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U.S. non-farm payrolls for September are due to be released on Friday, with economists forecasting a headline print of 250,000 new jobs, compared with 315,000 in August. Chicago Fed President Charles Evans on Thursday said the Fed’s policy rate is likely headed to 4.5%-4.75% by the spring of 2023 as the Fed increases borrowing costs to bring down too-high inflation. A high non-farm payroll data effectively means that more jobs are being created and that people are being employed, which is a sign of a growing economy.

Gold remains inside a four-month-old descending trend channel despite a recent corrective bounce off the yearly low, mainly due to the oversold RSI. The recovery moves, however, failed to cross the 78.6% Fibonacci retracement of the metal’s upward trajectory from August 2021 to March 2022, near $1,755. Don’t Monopolize software engineer vs programmer the Conversation.We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended.

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Overall, as per establishment survey data, in 2021, the U.S. public and private sectors have added around 6743K non-farm jobs, at an average monthly rate of 562K which is in line with the Fed’s estimates. As per preliminary estimates, the average NFP job additions for Jan-Sep’22 is now around 420K, much higher than the Fed’s estimate of 200K for the longer-term and average pre-COVID rate of around 168K. The provisional NFP job addition of 263K is the lowest since and also May’21. The YTM average is now around 420K in 2022 against the 2021 average of 562K. Gold buyers attack a three-week-old resistance line as the market’s anxiety underpins the metal’s haven demand. However, the US Nonfarm Payrolls remains awaited for fresh clues as the same will pave the ground for Fed tapering, which in turn could portray the US dollar strength and weigh on the gold prices.

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Despite marking a corrective pullback from a monthly low, gold prices remain below the key hurdles, namely an ascending trend line from August and a convergence of 50, 100 and 200 DMAs. The same joins downbeat RSI line and recently bearish MACD signals to keep gold sellers hopeful. That said, March’s high and April’s low, around $1,756, seem to be at a hand’s… A better-than-expected NFP number may be beneficial for the Canadian dollar as well, as the Canadian economy is strongly tied to the US economy. More jobs in the United States could mean more orders for Canadian companies and higher export values, for instance.

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