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What is nonfarm payroll, its importance in forex?

Do you know what is nonfarm payroll and what role it plays in forex trading? How to read and type nonfarm news effectively? Let’s read the following article with Learn Forex Trading to learn details!

what is nonfarm payroll and what do traders need to know

As a trader participating in the forex market, you certainly cannot ignore the information on what is nonfarm payroll and how to trade effectively.

what is nonfarm payroll?

Nonfarm stands for Nonfarm Payrolls. This is an economic bulletin published monthly by the United States Department of Labor. Nonfarm represents the number of new jobs created in the previous month, excluding agriculture. Nonfarm is an important indicator of America’s labor and economic health. This is the country with the largest economy in the world and greatly influences the foreign exchange market.

Nonfarm has a great influence on the value of the USD and related currency pairs in the Forex market. Therefore, traders need to know how to monitor, analyze, and trade nonfarm news effectively.

Nonfarm news publication time

Nonfarm is announced on the first Friday of each month, at 8:30 a.m. Depending on summer or winter. Traders can track the release schedule of nonfarm news on websites that provide economic calendars, such as Investing or ForexFactory.

This report does not include people working in agriculture, some government employees, households, and nonprofit organizations. Nonfarm is an important indicator to evaluate the US economic situation, inflation, and interest rates.

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Where can traders view nonfarm news?

In addition to websites that provide economic calendars. Traders can also view nonfarm news directly on the official website of the US Department of Labor. You can also see commentary, analysis, and forecasts about nonfarm news on websites specializing in forex.

One of the most reputable and popular websites is Forexfactory.com. This website provides a weekly economic calendar, including a nonfarm newsletter. Along with information about the previous period’s indexes, forecasts, and reality for this period. In addition, this website also has analysis articles on nonfarm news. Traders can follow and update the latest information about nonfarm news on this website.

Why nonfarm message boards are important for Forex trading

Traders need to clearly understand the importance of what is nonfarm payroll to the financial market to have appropriate trading strategies. The nonfarm message board is important for forex trading because it has a direct impact on the value of the USD. This is the key currency in forex trading. If the nonfarm message board shows an increase in the number of jobs, the unemployment rate decreases, and average income increases. This will show that the US economy is growing well. As a result, inflation will increase and the Federal Reserve (Fed) will tend to increase interest rates.

This will cause the USD to increase in value compared to other currencies. Conversely, if the nonfarm message board shows a decrease in the number of jobs, the unemployment rate increases and average income decreases. This will show that the US economy is weakening, inflation will decrease and the Fed will tend to reduce interest rates. This will cause the USD to depreciate compared to other currencies.

The importance of nonfarm in the Forex market

What is the impact on the forex market of what is nonfarm payroll?

Nonfarm message boards can cause strong fluctuations in the forex market. Especially currency pairs related to USD, such as EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD, and USD/CAD. In addition, nonfarm message boards also influence the prices of precious metals.

Usually, when the nonfarm bulletin board is announced, the market will have the following reactions:

If the nonfarm bulletin is better than forecast, it means the number of jobs increased more than expected. If the unemployment rate decreases more than expected and the average income increases more than expected, the USD will increase in value compared to other currencies.
If the nonfarm message board is worse than forecast. That is, the number of jobs increased less than expected, and the unemployment rate decreased less than expected. At the same time, if average income increases less than expected, the USD will depreciate compared to other currencies.
This will cause currency pairs with USD at the top (such as EUR/USD, GBP/USD, AUD/USD, NZD/USD) to increase in price. Additionally, currency pairs with USD in the back position (such as USD/JPY, USD/CHF, USD/CAD) decreased in price. In addition, the price of gold and silver will also increase with the USD.
The effects of nonfarm in the Forex market

How to bet on nonfarm news for forex trading

Traders need to understand how to read the news what is nonfarm payroll? From there, come up with appropriate trading strategies in the market.

How to read nonfarm news

To read nonfarm news effectively, you need to pay attention to the following three main indicators:

Non-farm Employment Change. This is an index showing the growth of the US economy.
Unemployment Rate. This is an index showing the depth of the US economy.
Average Hourly Earnings. This is an index showing inflation in the US economy.

To effectively bet on nonfarm news, traders need to know how to read nonfarm news quickly and accurately. There are two main ways to read nonfarm news:

Method 1: Compare actual data with forecast data. This is the simplest and most popular way, just look at the difference between actual data and forecast data to evaluate the good or bad level of the nonfarm message board. If actual figures are higher than forecast figures, then the nonfarm message board is considered better than expectations, and vice versa. This can be applied to all three main metrics of nonfarm feeds.
Method 2: Compare actual data with previous data. This is a more complex and in-depth method, requiring traders to know the trends and cycles of nonfarm message boards. This approach does not just look at the difference between actual data and forecast data. This also looks at the change in actual data compared to previous data.

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What strategies are possible to trade with what is nonfarm payroll?

With the above characteristics, then transactions with what is nonfarm payroll? To trade with nonfarm, traders can apply one of the following strategies:

Strategy 1: Trade with the trend. This is the simplest and safest strategy, just buy when the nonfarm bulletin board is better than expectations, and sell when the nonfarm bulletin board is worse than expectations. This strategy can be applied to popular USD currency pairs. Traders should set reasonable stop loss and take profit orders to limit risks and preserve profits.
Strategy 2: Reactive trading. This is a more complex and risky strategy, requiring traders to have experience and market analysis skills. This strategy is based on the fact that the market may have the opposite reaction after the nonfarm bulletin board is published. Besides, in this strategy, traders need to clearly understand concepts such as what is short selling or what is divergence.
How to bet on nonfarm news

So in the above article, Learn Forex Trading has informed you about what is nonfarm payroll. This is an important economic news for the forex market. To trade with nonfarm, traders need to know how to read nonfarm news quickly and accurately. Hope this article has provided you with useful information about nonfarm. Thereby helping traders know how to bet on nonfarm in forex trading.

FAQs:

what is nonfarm payroll?

Nonfarm is an economic newsletter published monthly by the United States Department of Labor. Nonfarm represents the number of new jobs created in the previous month, excluding agriculture.