In this overview, you will read about Jens Klatt’s webinar held on October 7, 2022, just after the US Non-Farm Payrolls (NFP) trading news release.
Each month, Admirals hosts an educational webinar about trading the NFP. Scheduled for 30 minutes after the NFP results are released, the session happens in the thick of the post-NFP market movements. All trades are carried out in the Admirals Demo Account in realistic market conditions.
Table of Contents
What happened in the markets during and after the October 7 NFP release? The main takeaways are that the USD gained strength and gold spot prices lost a lot of value.
Why? Webinar host and expert trader Jens Klatt explained what drove these values up and down during the macro-economic news release. The stronger the NFP results, the more likely it is that the US Federal Reserve will raise interest rates in November. This would add attraction to the US Dollar and pressure gold spot prices.
Why are employment numbers of interest?
Employment numbers indicate confidence in the economy. When the economy is good, factory orders increase, industrial production rises, and companies will meet higher demand through more investments. As a result, more workers will be hired, and hourly wages will increase. As people have more income, their consumption goes up, meaning higher economic growth and rising inflation, which motivates central banks to hike interest rates to avoid overheating in the economy.
Is that what is happening in the US economy right now, are conditions good? Jens Klatt had his doubts about the US economy’s strength and pointed to Meta Platforms CEO Mark Zuckerberg's decision to freeze hiring amid a technical recession. Jens also commented on a news article about the UN calling on the Federal Reserve and other central banks to halt interest rate increases to avoid a global economic downturn.
Formulating a scenario to trade the NFP news event
The NFP report is almost always released on the first Friday of the month and the ADP, another major US employment report, is released just before the NFP. Barring any surprises, there is a close correlation between the ADP employment report and NFP results. This correlation gives traders some clues as to whether the NFP’s performance will be positive, neutral or negative.
Jens Klatt approaches his plan by:
- understanding why the data matters and writing down potential scenarios,
- evaluating the overall market sentiment,
- choosing trading instruments that are affected by the NFP such as the S&P500 index, the USDJPY and gold.
Example of trading scenarios
Jens Klatt demonstrated on a Demo Account how he carries out his trading scenario after he writes it down. In this case, he gave an example of a neutral scenario in which the NFP comes in around the market consensus.
Example: In a neutral situation without any surprises, estimate the direction of gold, SP500, and USDJPY. These are the markets most likely to be affected in this scenario. Then decide your target entry and exit prices and research individual conditions around each instrument.
- Research example: the S&P500 went through selloffs because of high inflation and rising interest rates. The last time S&P500 rose so strongly in the opening of the quarter was in 1938.
- Research example: Japan holds more than 1 trillion US Dollars in US debt, so it’s likely to be affected by the NFP report.
Useful tools
When analyzing his scenario, Jens Klatt used the Chicago Mercantile Exchange’s FED Watch Tool and the Federal Reserve’s Fed Dot Plot in addition to Technical Analysis charts showing market trends.
To watch the entire webinar, follow this link to our YouTube channel.
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