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 flat lines around 1.1900; looks to US NFP report for fresh directional impetus
The EUR/USD pair is seen oscillating in a narrow trading band around the 1.1900 mark during the Asian session on Wednesday as traders opt to wait for the release of US monthly employment details before placing fresh directional bets.
GBP/USD recovers losses despite rising UK political risks, BoE rate cut bets
Pound Sterling advances against the US Dollar after registering modest losses in the previous session, trading around 1.3650 during the Asian hours on Wednesday. The pair could extend losses as the Pound Sterling faces pressure from rising political risks in the UK and growing expectations of near-term Bank of England rate cuts.
USD/JPY extends three-day rout below 154.00, NFP eyed
USD/JPY is extending its three-day rout below 154.00 in the Asian session on Wednesday, awaiting the release of the closely-watched US NFP report. In the meantime, 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 underpin the Japanese Yen, weighing on the pair amid intervention fears.
Editors’ Picks
AUD/USD hits fresh three-year highs above 0.7100 on hawkish RBA-speak
AUD/USD has refreshed three-year highs to regain 0.7100 and beyond in Wednesday's Asian trading. The pair remains undeterred by the mixed Chinese inflation data for January, which showed the growth in the Consumer Price Index slowing more than expected, while the Producer Price Index beat estimates. RBA official Hauser's hawkish commentary provides an extra boost to Aussie bulls.
USD/JPY extends three-day rout below 154.00, NFP eyed
USD/JPY is extending its three-day rout below 154.00 in the Asian session on Wednesday, awaiting the release of the closely-watched US NFP report. In the meantime, 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 underpin the Japanese Yen, weighing on the pair amid intervention fears.
Gold awaits US Nonfarm Payrolls data for a sustained upside
Gold remains capped below $5,100 early Wednesday, gathering pace for the US labor data. The US Dollar licks its wounds amid persistent Japanese Yen strength and potential downside risks to the US jobs report. Gold holds above $5,000 amid bullish daily RSI, with eyes on 61.8% Fibo resistance at $5,141.
Bitcoin, Ethereum and Ripple show no sign of recovery
Bitcoin, Ethereum, and Ripple show signs of cautious stabilization on Wednesday after failing to close above their key resistance levels earlier this week. BTC trades below $69,000, while ETH and XRP also encountered rejection near major resistance levels. With no immediate bullish catalyst, the top three cryptocurrencies continue to show no clear signs of a sustained recovery.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
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