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U.S. Non-Farm Payrolls [NFP] release Friday 4th January 2019


Non-Farm Payrolls are usually reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released. The US Non-Farm Payroll number for the month of December will be released locally on Friday the 4thof January at 15:30 SAST.

This is what you can expect for your trading day....

Why is the jobs number important?

The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month and the number being released will have a direct impact on the markets. In the United States consumer spending accounts for most of the economic activity and the Non-Farm Payrolls report represents 80% of the U.S workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs.

What happened previously?

The Non-Farm Payrolls number came out much lower than expected at 155K Non-Farm jobs against the 200K Non-Farm jobs expected.

The Average hourly earnings (M/M) for November also came in lower than expected at 0.2% and the U.S Unemployment rate for Novemberremained unchanged at 3.7%.

What is forecast this time?

With all the market turmoil over the festive season the U.S markets posted its worst annual return in 10 years and chances are there might be more downside on the cards. The U.S markets will be under the microscope over the next couple of days as the federal shutdown comes into focus. Trade negotiations between the U.S and China continues next week, and the Chinese economic slowdown poses global concerns.

The US Non-Farm Payroll data will be used by market participants this Friday to see if the growth we have seen on the U.S Jobs front can continue or if the economy is starting to slowdown.

U.S ADP Non-Farm Employment change:

The U.S. ADP Non-farm Employment Change is a very good predictor of the Non-Farm Payrolls report as the ADP Non-Farm Employment Change measures the monthly change in non-farm, private employment.

  • The U.S. ADP Nonfarm Employment Change is usually released two days ahead of the NFP number but due to the New Year’s Day Public holiday the ADP number was released on Thursday at 15:15 SAST.

The change in private employment came in higher at 271K from the expected forecast number of 179K for the month of December 2018. The ADP number came in higher than expected and all eyes turn to tomorrow to see what the Non-Farm Payrolls numbers have instore.

Looking at the chart of Wall Street 30

The Dow has recovered some ground from the 21680-support level from the major selloff we saw over December 2018. Today’s Non-Farm number might be the deciding factor to which direction the market will head into for the rest of January.

Looking at the chart below if we see the NFP number come in better than expected then Point 1.might be the rout to follow higher to resistance line 23442. Point 2.Will be the natural path to follow if the number disappoints today and the selloff might continue back lower to the support level of 21680.

Screenshot 2019-01-04 at 08.37.04

Source – Bloomberg

Jobs number:

The number of new Non-Farm jobs are expected to increase slightly to 180K from the previous months 155K Non-Farm jobs.

Take note a higher than expected jobs number should be taken as bullish for the Dollar (USD), while a lower than expected jobs number should be taken as bearish for the Dollar (USD).

Hourly earnings:

The Average hourly earnings (M/M) number is expected to increase to 0.3% from 0.2% from the previous month - This is a key figure to watch and if this number disappoints, it will signal a weak wage inflation outlook in the US.

Take note a higher than expected earnings number should be taken as bullish for the Dollar (USD), while a lower than expected earnings number should be taken as bearish for the Dollar (USD). 

U.S. Unemployment Rate

The U.S Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to remain unchanged from the previous month at 3.7% unemployment.

Take note a higher than expected rate should be taken as bearish for the Dollar (USD), while a lower than expected reading should be taken as bullish for the Dollar (USD).

What to trade internationally:

Major indices to look at will be the S&P 500, Wall Street 30, Nasdaq 100

Major Forex pairs to look at will be EUR/USD, GBP/USD and USD/JPY

Commodity to look at will be Gold.

What to trade locally:

Index to look at will be the ALSI

Forex pair to look at will be the USD/ZAR

Rand Hedges (BTI, CFR) and Rand Sensitives (Banks and Insurers)

How to trade the Non-Farm Payroll (NFP) report: The Strategies

There are many ways to trade the Non-Farm Payroll (NFP) report and here are a few strategies traders look at:

  • The Early birds: traders who will take an early position before the jobs number is released in anticipation that the directional movement the event will cause will be in their favour.
  • The Scalpers: as the data is released these traders will scalp and try and capitalize on the volatility that is created by the data, positively or negatively.
  • The calm and calculated: as the market digests the results of the Non-Farm Payroll (NFP) report and after the volatility swings have occurred these traders will take a position on the markets momentum.

When and what time is the US NFP (Non-Farm Payroll) announced in South Africa?

4thJanuary 2019 at 15.30 SAST.

May your trading day be profitable!



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