Skip to content On the first Friday of every month, the financial markets hold their breath. Traders the world over scrutinize their economic calendar in anticipation of the BLS release of a major indicator: Non-Farm Payroll, better known by its trading acronym NFP.
Fundamental analysis
This report on non-agricultural employment in the USA can regularly trigger spectacular movements on the currency markets.
If you're interested in trading the forex market in particular, understanding the impact of this indicator on currency pairs is essential. The macro-economic announcements such as Non-Farm Payrolls influence expectations regarding US monetary policy and can create opportunities... but also formidable traps for unprepared traders.
In this article, we'll take a closer look at this indicator, analyze its influence on exchange rates, and give you the keys to developing an effective strategy.
Non-Farm Payroll represents the number of jobs created in the U.S. during the previous month, excluding agricultural sectors, government employees and non-profit workers.
These U.S. employment statistics are compiled by the Bureau of Labor Statistics (BLS) via a survey of over 140,000 businesses, covering around 40% of all US non-farm employment.
Every month, analysts draw up forecasts for this NFP, and the gap between actual US non-farm employment data and expectations creates volatility on the financial markets.
Non-Farm Payroll is a key element in the set of indicators that the Fed monitors for its monetary policy. However, this BLS publication alone does not determine the central bank's decisions.
The Fed also analyzes inflation (PCE, CPI), economic growth, financial conditions and other macroeconomic data. A strong employment figure therefore does not automatically lead to monetary tightening.
Impact on expectations A higher-than-expected figure can reinforce expectations of a restrictive policy, but only if other indicators (inflation in particular) justify it.
Psychological effect This publication often generates movements disproportionate to the actual data. Traders react intensely, creating exceptional volatility on Forex. This reaction is sometimes disconnected from the real impact on monetary policy.
Correlation with other assets Beyond the foreign exchange market, this report influences Wall Street, government bonds and commodities.
The BLS publication takes place on the first Friday of each month at 2:30 pm CET (8:30 am EST). Visit economic calendar allows traders to monitor NFP data and plan their strategy.
Trading sessions concerned:
Trading on macroeconomic announcements like this one is characterized by extreme volatility and wide spreads.
With the US dollar accounting for around 90% of Forex market transactions, any data influencing the US economy is immediately reflected in exchange rates.
Transmission mechanism When figures exceed expectations, markets may anticipate a tightening of the Fed's monetary policy.
However, the dollar's reaction depends on many other factors: global risk sentiment, the policies of other central banks, and the state of other US economic indicators.
In some contexts, even a strong employment figure may not support the dollar if markets favor risky assets.
Typical (but not guaranteed) reactions include :
Movement intensity The Non-Farm Payroll indicator can cause movements of 50 to 150 pips in a matter of minutes on major pairs. This volatility creates opportunities for experienced traders with rigorous preparation, but represents major risks for retail traders due to high slippage.
EUR/USD - The queen pair Historically the most reactive, thanks to its exceptional liquidity and massive institutional trading volume. Spreads remain relatively tight even during periods of high volatility, although slippage remains problematic for retail traders.
GBP/USD - Volatility amplified The British pound tends to overreact to US employment data, with spreads widening sharply during the announcement.
USD/JPY - Technical reaction This pair reacts differently, often influenced by overall risk appetite rather than employment figures alone.
Pre-announcement phase (30 minutes before) :
Announcement phase (2:30 pm - 2:35 pm) :
Post-announcement phase (2:35 pm - 3:30 pm) :
Average statistics :
Professional traders prepare their positions well before the publication of the NFP by analyzing the economic context and market expectations.
Preliminary analysis Market watch: Consults the economic forecasts of the major investment banks. The gap between consensus and reality determines the intensity of market reaction.
Early positioning This approach is not recommended for retail traders, as it requires sufficient capital to absorb violent contrarian movements and access to professional tools to manage slippage.
Waiting method : For retail traders, waiting 15-20 minutes after publication is generally more prudent.
Trading during announcements of this scale presents major challenges, even for experienced traders.
Immediate breakout technique For professional traders with ECN access. Retail traders face :
Correction strategy After the initial movement, pairs often go through a correction phase. This approach involves waiting for the first 50+ pips of movement, identifying retracement levels, then entering the main trend.
Timing management The first 15 minutes are the most dangerous. Statistics show that over 60% of individual traders lose money by trading directly during this phase.
Position sizing rules :
Adapted stops and lenses :
Technical protection Check stability
Non-agricultural job creation US Non-Farm Payrolls: The key data in the US Non-Farm Payrolls report, generating the immediate reaction. A figure in excess of 200,000 is considered solid, while below 100,000 signals a slowdown.
Unemployment rate The main figure: Published simultaneously, it can sometimes contradict the main figure. A fall in unemployment with little job creation suggests a contraction in the labor force.
Hourly wage trends Average Hourly Earnings can sometimes have more impact on Forex than the headline figure. A rise of 0.3%+ monthly may worry the Fed about inflation.
Reviews of previous months Large revisions (>50K) can sometimes completely reverse the market's initial reaction.
Relationship with ADP The ADP report, published 2 days before, sometimes gives an indication of the trend. However, deviations can be significant (100K+).
Impact on Fed expectations Consistently strong figures (>200K for 3+ months) can increase the likelihood of a rate hike, but this correlation needs to be analyzed in conjunction with inflation data.
Trading at BLS attracts many traders, but statistics show that the majority of retail traders lose money on this event.
Blindly following the first move More than 60% of initial movements are partially or totally reversed within 15 minutes.
Overestimating impact : In reality, geopolitics, central bank statements, global risk sentiment and the policies of other major central banks play a major role that can offset the effect of employment data.
Underestimating slippage On non-ECN platforms, slippage can reach 30-50 pips, turning a theoretically profitable strategy into a systematic loss.
Ignoring the macroeconomic context : The economic cycle, Fed policy, the state of inflation and geopolitical developments must all be taken into account.
Visit ECN brokers with direct market execution generally offer the best conditions. Look for platforms with a proven track record of execution during major economic announcements.
Use an economic calendar to find out when the NFP will be published in trading, consensus forecasts, previous data and expected impact.
Trading NFPs is one of the most complex challenges.
Key points to remember :
This announcement will continue to be a catalyst for movements in the Forex market. For most traders, watching and learning remains the best initial strategy.
Jonathan Bardon
An independent pro trader since 2012 and an Ichimoku expert since 2017, Jo is our trading trainer at the training center. Xenesy.
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