The NFP report, also known as the Non-Farm Payrolls report, is a monthly report released by the U.S. Bureau of Labor Statistics that tracks the number of people employed in the U.S. non-farm sector.
Traders and economists closely watch the information as it provides a snapshot of the health of the U.S. economy.
The release of the NFP report often results in significant price movements in currencies and other assets worldwide, as traders attempt to anticipate how the data will affect monetary policy decisions.
The same is true in Japan, where the report impacts traders and government policymakers.
The Bank of Japan (BOJ) has been struggling to hit its 2 percent inflation target for years, and Friday’s data could provide clues on whether more easing is needed.
Some economists expect the BOJ to announce additional stimulus measures at its next meeting in March, especially if inflation remains stubbornly low.
In light of this, traders often take positions in anticipation of the NFP report, and there is often a lot of volatility in the markets in the hours leading up to its release.
For example, the yen tends to strengthen when expectations for more robust economic growth call for tighter monetary policy. At the same time, it weakens when expectations for weaker growth lead to calls for looser policy.
There are also often significant movements in Japanese stock prices around the NFP release.
The Japanese unemployment rate was unchanged at 3.1 percent in December, labour ministry data showed on Friday, matching market expectations.
The number of employed people rose by 110 thousand to 64.8 million while the number of unemployed increased by 5 thousand to 2.2 million – both slightly more than expected.
Unemployment remained at a 23-year low even as the pace of expansion moderated substantially for the first time since 2016, providing further evidence that Japan’s economy is cooling gradually after years of solid growth and ultra-loose monetary policy.
According to Reuters, the jobs/population ratio remained unchanged from last month at 63.3 percent, still near multi-decade highs after peaking at 63.4 percent in September 2015.
This figure is closely watched as it is seen as a critical indicator of the health of Japan’s economy.
A few tips
So how can traders trade around the NFP report in Japan? Follow these tips and Saxo Bank.
- Watch for clues about the BOJ’s policy stance in other data releases before the NFP report comes out. For example, if the BOJ announces additional stimulus measures shortly before the NFP report, that could be a sign that they expect it to be weaker than expected.
- Use price action and technical analysis to help you anticipate price movements. For example, look at indicators such as moving averages, Bollinger bands, and Relative Strength Index (RSI) to help you determine when a currency or asset is overbought or oversold.
- Usepivot points to help you determine support and resistance levels.
- Be aware of news events that could affect the markets around the NFP report. For example, if there is a prominent political or economic news event in the days leading up to it, that could cause prices to move significantly.
- Use stop losses and limit orders to protect your positions.
By following these tips, traders can help maximize their profits while minimizing their risk when trading around the NFP report in Japan.
In conclusion
Trading around the NFP report in Japan can be pretty volatile. Forex traders who are long or short US dollars may want to adjust their positions ahead of the report’s release, as it can have a significant impact on financial markets.
Meanwhile, traders holding positions in Japanese yen crosses such as GBP/JPY, EUR/JPY and AUD/JPY should be prepared for a possible rally or sell-off in these currencies after the release of the NFP report.
Finally, it is essential to keep an eye on other economic indicators such as Japan’s monthly economic report, as they can provide insights into the Bank of Japan’s monetary policy decisions.
