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The Best Way To Trade The NFP

How to trade US Non-Farm payrolls like the professionals do

The United States Non-Farm payrolls provide a picture of the country’s labor market, and the report usually comes out on the first Friday of each month at 13:30 GMT.
The report measures the number of jobs gained during the previous month and which are not farm-related. The report includes the unemployment rate and average hourly earnings. It is one of the biggest market-moving events of each month. It tells policymakers in the United States if the country is close to maximum employment and will help to determine future interest rates. If job growth is close to the maximum, the Federal Reserve will typically look to raise interest rates, assuming that inflation is where they need it to be, and vice versa.


Example A

In example A, let’s look at a 30-minute chart of the EURUSD for the 10th of January, when the figures were released, and where 164K jobs were expected to be added to the US labor market.
Just prior to the release of the NFP, seller’s drove price action down at position 1. We can only determine that the market expectation was for a strong number, possibly above 164K. However, as marked on our chart at position 2, with the price adjacent to the 30-minute candle associated with the release at position A after the number came out, which was 145K, less than expected, the price action spiked higher to position B before being sold again to position C, an overall move of 27 pips during this period. Buyers then drove the price action higher at position 3, before price action consolidated between an area of support and resistance at position 4. Please note that the time on our chart is set 2 hours ahead of the actual time.

Example B

Let’s now look at example B, which is the same chart, but with some trading ideas. In the run-up to the release of the NFP, we can see that an area of resistance and support has formed at positions A and B and were a sell-off happened just before the release, probably because the market expected a strong number from the United States.
There was an opportunity to go short at position B when price action fell below the support line. A tight stop loss should have been implemented. On this occasion, 17 pips were available to the downside with the possibility of bagging some profit and closing the trade just before the data release.
However, we already know that the data was worse than expected and should have anticipated that the dollar would start to lose ground. We can also see tails developing on some of the candlesticks and a classic V formation, which occurs during this event.
The next trade opportunity is when price action moves higher, and above our previous areas of support at position B, and above our previous area of resistance at position A and where position D offers a buying opportunity, as price action takes out all of the previous highs.
This setup can also be applied in reverse, should the NFP data be better than expected.
If the data is + or – a few thousand as per the expected number, expect a muted response by the market.
Had the number been much better than the 164k, which was expected, we would have likely seen a further decline in the pair. Bear in mind that when this data is released, it is dependent on how the market assimilates it. Sometimes the data may be bad, but not as bad as expected, and sometimes it could be good, but not as good as expected, and often the NFP report is released simultaneously with

the Canadian unemployment release.
Therefore it is not wise to pull the trigger on a trade within a couple of minutes either side of this very important data release. The best way to trade Non-Farm payrolls is in the hour or so before the event or an hour or so after the event.
Keep out for this classic price action formation for each payroll event as it recurs an awful lot!

Forex Market Analysis

Gold Sideways Session Continues Despite Weak NFP Report! 

Gold prices trimmed down on Friday, after sinking as much as 1% in the prior session, as rising tensions in the Middle East lead traders to shift to riskier assets. The safe-haven-metal prices still flashing red and continue to drop mainly due to risk-on sentiment in the market in the wake of de-escalated US-Iran conflict.

As we all well aware that the gold prices hit the high level of $1,611 on Wednesday since 7-year high after Iran shot ballistic missiles at two Iraqi airbases housing U.S. forces. But later, U.S. President Donald Trump gave the sluggish comments regarding impose new economic restrictions on Iran rather than taking any military action against the country. 

Most Asian markets continued to rise on Friday morning as well because trade talks between the U.S. and China continued to move forward according to the plan and will sign the deal on 15 January.

The statement came from China’s Vice Premier Liu He, head of the country’s negotiation team in China-U.S. trade talks, said that he is set to visit Washington next week to sign a trade deal with the U.S.

With this, the U.S. 10-year treasury yields take the bids around 1.865% while S&P 500 Futures marks 0.20% gains to cross 3,280 by the time of writing.

Daily Support and Resistance

  • S3 1481.92
  • S2 1525.03
  • S1 1540.84

Pivot Point 1568.13

  • R1 1583.95
  • R2 1611.24
  • R3 1654.34

Gold traded in line with the prior estimate as it dropped sharply on the breach of 1,552 marks to set a low around 1,538. At the moment, 1,552 is working as a critical trading level. Below this, gold can trade bearish unto 1,542. 

On the upper side, the bullish breakout of 1,552 can encourage buying, but for that, we need a strong reason, and the weaker and expected NFP can be this reason today. In any event, an upward breakout of 1,552 can lead to gold prices towards 1,561. Good luck! 

Forex Market Analysis

Gold Triple Top Plays Well – NFP Figures Drive Sell-off! 

On Friday, gold prices slid as influential figures from China faded the risk appetite, while the U.S. labor market figure was robust. U.S. Bureau of Labor Statistics announced total nonfarm payroll (NFP) employment increased by a 128k jobs in October, surpassing forecast of 89k. Besides this, the headline number for the previous month witnessed an upward correction to 180k from 136k. 

Hence, the unemployment rate observed 0.1ppt growth to 3.6%, meeting forecast with the uptick associated with the increase in the labor force participation rate.

Next month, the U.S. & China were supposed to meet at APEC Summit in Chile to discuss a potential Phase-one Trade agreement between both economies. U.S. President Donald Trump and Chinese President Xi Jinping were expected to sign the phase-one deal on that Summit. But due to domestic unrest, the meeting was canceled.

Trump announced that both countries would continue the negotiations and would sign a portion of that deal in the coming weeks.

On Thursday, Chinese Officials showed doubts on the prospects for an agreement and revealed that they were concerned about Trump’s impulsive nature and said that Trump might back out of even a limited deal at the last minute.

Gold – XAU/USD – Daily Technical Levels

Support     Resistance 

1501.56    1519.33

1490.17    1525.71

1472.4      1543.48

Pivot Point 1507.94

Gold is still facing triple top resistance at 1,514, which is keeping gold bearish below this level. On the lower side, gold has already completed 38.2% Fibonacci retracement at 1,50 area. But price reversed right after to close the candle above 23.6% Fibonacci retracement level of 1,507. Therefore, let’s consider staying bearish below 1,513 level today. All the best!