LiveLearnTrade Team
LiveLearnTrade
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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Editors’ Picks
EUR/USD holds firm above 1.1900 as US NFP looms
EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.
GBP/USD remains above nine-day EMA near 1.3650
GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.
USD/JPY remains heavy around 153.00 on firmer Japanese Yen
USD/JPY is sustaining its three-day rout at around 153.00 in the European session on Wednesday, awaiting the closely-watched US NFP report. Rising bets on Fed rate cuts keep the US Dollar depressed. In contrast, expectations that PM Takaichi's policies will boost the economy and allow the BoJ to stick to its hawkish stance bolster the Japanese Yen, weighing on the pair amid intervention fears.
Editors’ Picks
EUR/USD holds firm above 1.1900 as US NFP looms
EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.
USD/JPY remains heavy around 153.00 on firmer Japanese Yen
USD/JPY is sustaining its three-day rout at around 153.00 in the European session on Wednesday, awaiting the closely-watched US NFP report. Rising bets on Fed rate cuts keep the US Dollar depressed. In contrast, expectations that PM Takaichi's policies will boost the economy and allow the BoJ to stick to its hawkish stance bolster the Japanese Yen, weighing on the pair amid intervention fears.
Gold sticks to gains near $5,050 as focus shifts to US NFP
Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.
US Nonfarm Payrolls expected to show modest job gains in January
The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.
S&P 500 at 7,000 is a valuation test, not a liquidity problem
The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.
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