The Event:

Non-farm payroll is released at 8:30 AM EST, Friday, November 6th. This monthly event is the king of all regular Forex related announcements for the USD based pairs, tending to cause severe reaction.

Description:

The non-farm payroll release measures the monthly change in employment minus farming. Labor/employment is one of the most critical segment of the U.S. economy. The NFP is the most complete measure of U.S. employment levels, thus is closely scrutinized for clues on the state of the economy. The Federal Reserve is keenly interested in this figure as a rise signals a growing economy which potentially can lead to inflationary pressures forcing the Central Bank to raise interest rates. Conversely, a drop in this figure can indicate a contacting economy requiring a decrease in interest rates to kick start growth. Studies have indicated that the NFP release moves the EUR/USD an average range of 124 Pips in the first 20 minutes after release. The average daily range on the day of release is 193 Pips. This is greater than FOMC decisions, GDP and CPI announcements. As you can see this is an extremely important event for Forex traders, the king of all standard releases. Some Forex traders only trade this release, it is that important in the currency trading world.

Trader Take:

During ordinary economic conditions, the NFP release is truly the king of all regular releases. However, these are extraordinary times. The very standard core functioning of the economy is being challenged and what was once believed to be positive for a currency can act in the negative direction. This is due to the change an upswing in a beat down economy can bring to risk levels of investors. For example, an improving US economy can cause investors to sell the USD and buy riskier assets such as equities depressing the Greenback. With this said, the number missed estimates substantially last month and another wildly over optimistic forecast this month should result in another big miss. The employment situation in the U.S. is not improving despite repetitive wrong forecasts to the contrary. However, surprises can and do happen, be ready for anything!!

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