NFP and Forex: What is NFP and How to Trade It? (2024)

FAQs

NFP and Forex: What is NFP and How to Trade It? ›

Nonfarm payrolls (NFPs) are an important economic indicator related to employment in the U.S. Data released on NFPs can be a catalyst for trade in foreign exchange trades based on changes in employment. Technical analysis can be employed in the NFP report using 5 or 15-minute chart intervals.

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The NFP report is closely watched by traders and investors worldwide as it provides valuable insights into the health of the U.S. labor market and the overall economy. Trading the NFP release can be highly lucrative but also carries significant risks due to its potential to cause volatility in the Forex market.

The US non-farm payrolls, or 'NFPs', is an official statistic released by the US Department of Labor, usually on the first Friday of every month. The non-farm payrolls measure the number of people currently in employment in the US and are released along with the US unemployment rate.

One way in which traders can consider utilising an OCO order when trading the NFP is by using a breakout strategy. A breakout strategy consists of establishing a range around the price of an asset and then entering a long or short position once the price breaks out of this predetermined range.

What Is the NFP Trading Strategy? The NFP report generally affects all major currency pairs, but one of the favorites among traders is the British pound/U.S. dollar (GBP/USD). Because the forex market is open 24 hours a day, all traders can trade on the news event.

If the non-farm payroll figure exceeds market expectations, it tends to create positive sentiment regarding the US economy, reinforcing the US dollar. Conversely, weaker-than-expected employment data can lead to a negative perception of the US economy, potentially weakening the US dollar.

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NFP Definition

It is released usually on the first Friday of each month, at 8:30 EST. It is published by the US Department of Labor. This report is important because the US is the largest economy in the world and its currency (US Dollar) is the global reserve currency.

How to read NFP? ›

How to Read the NFP? The NFP measures the number of jobs created or lost in the U.S. economy over the prior month. For example, -1000K means 100,000 jobs were lost in all non-agricultural businesses. To get a feel for the employment situation, it's good to review the history of previous NFP releases.

Non-Farm Payroll Data

The increase is an indication that the economy is growing when non-farm payrolls are expanding but this may lead to an increase in inflation. That may be viewed as a negative for the economy if increases in non-farm payroll occur at a fast rate.

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Step 1: 30 minutes before the NFP release, open the chart and find the highest high and the lowest low for the last four hours. Step 2: Place two pending orders on both sides: a buy pending order at least 5-10 pips above the highest high and a sell pending order 5-10 pips below the lowest low in that range.

This makes autumn months one of the best times of the year to trade forex. By the second half of December, trading activity slows down again, much like in August. The few weeks before and after Christmas are the slowest, and it's not until mid-January that the markets start to pick up again.

The NFP report plays a crucial role in the Federal Reserve's monetary policy decisions. Positive employment data may lead to expectations of tightening monetary policy, including potential interest rate hikes. Such expectations can strengthen the US Dollar and decrease gold prices.

NFP Definition

It is released usually on the first Friday of each month, at 8:30 EST. It is published by the US Department of Labor. This report is important because the US is the largest economy in the world and its currency (US Dollar) is the global reserve currency.

How many pips does the NFP usually move? The first hour following the release of non-farm payrolls data usually sees the EUR/USD currency pair move by 50 pips and the USD/JPY currency pair move by 64 pips.

It is usually released on the first Friday of the month, in an Employment Situation report that also includes the US unemployment rate, average hourly earnings, and participation rate. Although its importance has dimmed somewhat in recent years, the NFP is still one of the most significant economic indicators.

The Bureau of Labor statistics normally releases the NFP data on the first Friday of every month at 8:30 AM ET, which is 13:30pm UK time. You can keep track of upcoming Non-Farm Payroll releases, along with other important events using ourfree Forex calendar. Want to see all the upcoming economic events?