NFP: the easy steps for big gains

The market awaits the big moves on the release of American job data at 15:30 MT time.  This term comprises important indicators related to the employment of the United States: unemployment rate, average hourly earnings and, of course, non-farm employment change (non-farm payrolls). Together, these indicators provide ideal fuel for making the USD highly volatile.

Why trade on the NFP release

The first and the foremost reason: non-farm payrolls make the USD moving greatly against the other currencies.

Let’s take a look at the previous release on January 10. NFP was expected at 162K - a much lower level than the December one. The actual figures came out as an awful surprise for traders with just 145K payrolls reported. Besides that, average hourly earnings increased only by 0.1% (vs. the forecast of 0.3%). At the same time, the unemployment rate remained at 3.5%. The first reaction of the market caused the mixed performance of the USD. If we look at the H1 chart of EUR/USD, we can see a candlestick with long upper and lower shadows. After the initial uncertainty, bulls took control of the situation and pushed the pair higher.

If you want to take advantage of the initial reaction after the NFP release, we recommend you to consider one useful NFP strategy.

What to trade on NFP

Besides EUR/USD, you can trade any currency pair which consists of USD. Just be sure that you know what are base and quote currencies in the pair so you are not confused while placing an order. For example, if the NFP release is greater than the forecasts and you want to trade USD/JPY, you should place a “buy” order, while for GBP/USD it will be a “sell”.

Plus, pay attention that Canada releases its job data at the same time, so the performance of USD/CAD may be choppy.

The forecasts

Analysts expect NFP to advance by 163K payrolls and an increase of average hourly earnings by 0.3%. The unemployment rate may likely remain at 3.5%. As usual, higher-than-expected non-farm payrolls and average hourly earnings and the lower unemployment rates will be in bulls’ favor.

Experts see the strong releases of ADP employment change (291K vs 157K), the drop of 4-week jobless claims, and CB consumer confidence at the 5-months high as the main arguments which may drive the NFP higher.  Will we see a surprise?

The levels

On H4 of EUR/USD, we can see that the pair has been trading at the lowest levels since the last October.

• If NFP and other indicators are greater than the forecasts, we may expect the pair to slide below the 1.0940 level. The next support will lie at 1.0907.
• If one indicator (NFP or average hourly earnings) is slightly lower than the forecasts, and the other outperforms, the pair may rise towards 1.0981 and even 1.1 levels initially, but slide below the 1.0940 level afterward.
• In the least favorable scenario, when all indicators disappoint the market, we may expect the rise above the 1.0981 level with the following retest of 1.1. If that level is broken, the next key resistance will lie at 1.1021.

What about USD/JPY? We can see that the pair is getting ready for its further move. Following the scenarios for EUR/USD described above we can say that:

• In the first case, the key levels from the upside lie at 110, 110.1 and 110.2.
• In case when one indicator disappoints, and others outperform, the pair may slide to 109.75 at first, but then rise to the 110 and 110.1 levels.
• In the worst scenario for the USD, the pair will slide towards the 109.5 level (100-period SMA).

What’s now? Here are the steps you need to do ahead of NFP.

1. Check the economic calendar;
2. Follow the live session on NFP trading -
   https://www.youtube.com/watch?v=5D59fVlNKZo
3. Check the strategy.

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Author: FBS Analyst Team

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