NFP – The Most Well-known Forex News Event But, Do You Know What It Means?

In this issue of the Celestial Trading Tools Educational Blog we will be taking a look into the widely known fundamental release known as Non-Farm Payrolls or NFP for short. This fundamental release is typically released on the first Friday of every month at 13:30 GMT.

What is NFP?
Before we take a look at any data releases, we need to understand exactly what NFP means. NFP is a monthly data release within the US. It is a reflection of the number of jobs added to the US economy within the previous month except any agricultural, self-employed or military positions. This data release can give us a very good insight into the state of the US economy for the upcoming month.

Why NFP Is Important?
NFP is important to us as traders as it gives us a measure of the US Economy strength. If more jobs are being added each month to the US Economy, we can expect that the economy is growing well, and more people are in work increasing GDP and reducing unemployment rates.

If less jobs are being added to the US Economy or even jobs taken away, then we can expect the Economy is weakening as less people are earning money and so GDP will drop, and unemployment will rise causing the US Dollar to lose strength.

How We Use NFP?
When NFP data is released there is usually a volatility spike within the market causing large moves which have been in excess of over 150 pips in 5 or 10 minutes. These moves are usually caused by the big banks editing their projections on the USD after the release. Some traders also try to get in on these moves and make a quick buck. But that is something we would heavily object against.

Instead we let the market settle and analyse the data to give us a forecast on the upcoming strength/weakness of the US Dollar over the next month. If results released are higher than expected, then we can say with some degree of certainty that the US Economy is doing well and therefore the strength of the US Dollar will rise over the next month. If results are below expectation, then it could be cause for concern and US Dollar strength may be falling over the next month.

That is a whistle stop tour of NFP and how we can use the data release within our trading techniques. We hope you found this issue of the Celestial Trading Tools Educational Blog insightful and useful and look forward to seeing you back for the next issue soon.

Celestial

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