- NFP Is a Highly Anticipated News Event
- Expectations are Set at 230k
First, NFP looks specifically at net changes in employment as jobs are created or subtracted in an economy in any given month. The term Non-Farm is used since farm / agricultural workers are not included in the employment count. The decision to not include agricultural jobs lies in these jobs being largely seasonal that could possibly produce small temporary shifts in labor reporting. Below we can see a composite of past NFP events from September 2012 through last month’s release. Through graphing we can see that employment figures have gradually been getting higher, after bottoming with the 2014 low of Just 84k new jobs reported in January.
To get an idea of what may be in store for this week’s NFP announcement,
we can take a moment and review last month’s event. Below we can see a
EURUSD 5 minute chart tracking price during the NFP news release. NFP
numbers were expected to be released at 230k, meaning analysts expected
230,000 new jobs to be added to the economy. However, at the time of
release the NFP number was issued lower than expected at 209k. Traders
were left to react to this lower number with the market immediately
reacting by selling off the US Dollar. After a few hours price action
settled with the EURUSD increasing in value as much as 58 pips from the
event low at 1.3189.
EURUSD August 2014 NFP Release
So what should traders look for this month, with NFP totals again being
released on Friday the 5th? Expectations are set for 216k new jobs to be
created. Taking a cue from last month’s report, if expectations are
missed this could again lead to a selloff of the US Dollar across
multiple currency pairs. However if NFP numbers are better than
expected, or if the number is a narrow miss, traders may take this as a
positive sign and look for the US Dollar to rally. Once a direction is
established traders can then trade the news using the strategy of their
choosing.