NFP Preview: How to trade US employment data

After a month of monetary madness in March, April will see the release of economic data, which will highlight the impact so far of COVID-19. As it is the first week of the new month, this Friday will see the much anticipated release of the US Non-Farm Payrolls. So what exactly is this? And how can a trader use this information?

Types of market analysis

Traditionally in financial trading there are two main ways to analyse a market and find potential opportunities. Most traders, especially day traders typically look at the technical side of analyzing. Which is heavily geared towards charting patterns and viewing historical data to help predict where future moves could potentially take place. 

The second type of trading analysis is more driven by fundamentals and Macro economics. There are a variety of fundamentals that traders can look towards in attempting to find trade ideas. Below we explore one of the main types and understand how a trader can use it when in search of opportunities.

What is NFP?

The NFP or Non-Farm Payroll is probably one of the most viewed fundamental events in the world of trading. This is essentially the US employment report, which does not take into account jobs from the farming/seasonal sector. The NFP number is released once a month on the first Friday of each month, tomorrow April 3rd for example. 

The number reports the stats from the previous calendar month. So the NFP report released in March will detail February’s jobs number and the number released tomorrow, will detail the numbers for March. In March the Coronavirus caused most countries to shut down, a lot of jobs lost in the process. In the US it was claimed 3.3 million people are now unemployed, as a result. Friday's figures will be the first time we will see how this record number of those claiming to be jobless, impact the unemployment rate which stands at 3.5%.

How do traders use the NFP?

So to simplify the above let’s look at the following equation.

• Better than expected Jobs Numbers = Strong USD = Weak Safe Havens (e.g Gold)
• Below expected Jobs Number = Weak USD = Strong Safe Havens (e.g Gold)

For the first time in history, tomorrow’s NFP is forecasted to come in at -100k jobs. Should this number come out better than expected, or worse then the above equation may hold true. 

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