US Non-Farm Payroll Release

Yes, folks it is that time again for the monthly US Non-Farm Payroll (NFP) numbers to be released. The number will be released on Friday the 6^th of April at 14:30 local time.

This is what you can expect for the January NFP coming up...

What happened previously:

There was a significant increase in the jobs number released in the month of March. The Non-Farm Payrolls number came out higher than expected at 313K Non-Farm jobs over the 190K Non-Farm jobs expected.

The Average hourly earnings (M/M) also served as a surprise coming in lower than expected only increasing by 0.1% from the 0.3% market forecast.

Looking back at the charts internationally:

Wall Street 30:

Source: Bloomberg

Dollar Index (DXY):

Source: Bloomberg

Looking back at the charts locally:

USD/ZAR:

 Source: Bloomberg

What to look out for before NFP numbers are released:

The U.S. ADP Nonfarm Employment Change is a very good predictor of the NFP report as the ADP Nonfarm Employment Change measures the monthly change in non-farm, private employment. The U.S. ADP Nonfarm Employment Change will be released on Wednesday the 4^th of April around 14:15 local time.

What is forecast this time:

Jobs number:

There is a lower number of new jobs expected at 195K Non-Farm jobs from the previous 313K Non-Farm jobs number last month.

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) are expected to increase by 0.3% up from 0.1% in 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).

What to trade internationally:

1. Major indices to look at will be the S&P 500, Wall Street 30 and the VIX
2. Major Forex pairs to look at will be EUR/USD, GBP/USD and JPY/USD
3. Commodity to look at will be Gold.

What to trade locally:

1. Index to look at will be the ALSI
2. Forex pair to look at will be the USD/ZAR
3. Rand Hedges (BTI, CFR) and Rand Sensitives (Banks and Insurers)

What is the Non-Farm Payroll? 

The NFP report is treated as a key economic indicator for the United States.  The NFP is considered the most comprehensive employment number released – as it represents 80% of the U.S workforce. 

NonFarm Payrolls are reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released.  The report contains valuable insights into the labour force that have a direct impact on the stock market, the value of the U.S. dollar and the price of gold. 

The reason why farmers are excluded from employment figures is due to the seasonality in farm jobs.  

The Strategy:

There are multiple ways of trading the NFP report; there are 3 basic strategies to be aware of:

• Traders who take a position early, before the data is announced, in anticipation for the directional movement the event will cause.
• Traders who take a position as the data is announced, hoping to scalp a quick profit off the volatility created by the data, be it negative or positive.
• Traders may wait for the market to digest the significance of the results, and after the initial swings have occurred, take a position on the side of the dominant momentum. 

Trading Products Affected:

The NFP report affects major currency pairs as well as U.S. market index futures.  Traders should take note of:

• GBPUSD
• JPYUSD
• EURUSD
• MEXICAN PESO 
• S&P500 Index
• Wall Street Index
• Gold
• VIX

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

6th April 2018 at 2.30pm

May your trading day be profitable!

Read previous NFP note for March...