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US Non-Farm Payrolls Preview: How It Will Impact USDJPY?

On Friday by 12.30pm GMT, the US monthly employment report, popularly known as the Non-Farm Payrolls or NFP, will be released. This report consists of both the employment change and the unemployment rate.

The market consensus is for the US economy to have added 163K new jobs in August, which would be a shade lower than the 164K jobs added the previous month. The unemployment rate is expected to remain unchanged at 3.7%.

We will also see the release of the average hourly earnings, with a consensus of a 0.3% monthly growth; the same as was seen for the last month.

These figures have become more relevant with time as the US-China trade impasse continues to linger. Data released yesterday showed improved economic activity around the manufacturing and services sector. This month’s NFP may therefore focus more on domestic situation rather than on the global economic outlook.

Trading the NFP

The currency pair of choice in trading the NFP is the USDJPY. It holds an inverse correlation with gold, so gold is another asset that could see immense volatility, depending on the deviation impact.

Since multiple items are being watched, the NFP is not just about deviation: it is also about non-conflict between the figures. For the USDJPY, we are looking for a deviation of more than 1K on both ends.

If the employment change is 166K and higher and unemployment rate is static or reduced, this is USD positive and a buy opportunity should be sought on the USDJPY, looking for at least 50 pips in the first few minutes, and 100 pips in the next few hours.

If the employment change is less than 163K, with a rising or static unemployment rate, this is USD-negative and would prompt a sell on the USDJPY, looking for the same pip targets.

Also watch for any change in the Average Hourly earnings. Depending on the degree of deviation of the core NFP report and the hourly earnings, the one with the greater deviation (in case of conflict) will carry the day.