Topic: Finance
There are many people involved in forex trade signals do not realize how significant to the global financial markets the US Non-Farm Payroll happens to be. Many people ask me , " why each month does the number of US jobs make the market jump up and down so much after it is released ?" To answer that question it is important to look at what is represented by the US jobs number . This will show us why it can make markets move in a way nothing else can .
Each month, on the first Friday, the US Non-Farm payroll report is released . The US Bureau of Labor and Statistics is the one to release it and the things that it does measure, is the number of new jobs, outside of farming , created in the prior month by the US economy . It is such an important fundamental news announcement because this number is a reflection on the health of the economy in the US, and thus affects the global economy as well. Just remember, the US economy is the largest in the world and the single largest component that drives the US economy is consumer spending ; this actually totals at least 70% ! Thus , in forex trade signals, since the interest rates in a country is the main factor that affects the currency's strength or weakness, you must look at the rates and what is driving them; or the US Federal Reserve's interest rate policy . The jobs report is probably the single most important piece of fundamental data that the Fed uses in order to set their short term interest rates and because of this, this report can and usually does , lead to quite a bit of volatility in various markets .
Why does the jobs report have anything to do with where the Federal Reserve sets short term interest rates ? Great question ! If the jobs report comes out strong that generally means that people are employed and resource utilization is high . This also means that companies are employing workers and workers, or consumers, are spending money on things like eating out, shopping for clothes, etc and all of these things drive the economy ; they make the economy grow or heat up . When the economy is growing, this means that there is more money circulating and keeping inflation in check is very important for the Federal Reserve. They cool the economy and keep inflation in check by raising the short term rates, or they can raise inflation by lowering the short term rates, heating the economy up. So you see , the jobs number is one of, if not the primary factor , driving all this right under the surface.
The next time you are trying to prepare for a forex trade signals week or the next day, remember to take a look at the events calendar for the fundamental information that is scheduled to be released that upcoming day or week . If you're in the first week of the month then you'll have the Non-Farm Payrolls report to look forward to on Friday of that first week since this is always the day of release. If you're looking to take advantage of the volatility that comes after the release of the jobs report , keep in mind this formula: If the number of jobs are stronger than anticipated, it usually means the economy is stronger which will lead to a strengthening of the currency because short term interest rates go higher. Oppositely, if you find the jobs report is weaker than it was expected to be then in most cases the short term interest rates will go lower leading to the weakness of the currency. It's not always so black and white , but you can have a leg up on competitors with knowledge of these general parameters .
David F Dacosta - Is a private trader using technical analysis to do forex trade signals & futures trading. David makes specific trade recommendations for a small select group of traders. He uses drummond geometry to make his forecasts. Click Here for training materials and a free forex trading forecast.
