NFP announcement - Market volatility on the way.

We received the latest Non farm Payroll report for the US for the month of February. This economic event is bound to bring about unexpected volatility (as it always does) so it is best to prepare beforehand. In this article, we will discuss the current economic structure of the US and how to prepare for the incoming volatility.

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Current US economy

The US dollar has been on a positive rise for the past month as inflation seems to have slowed down. This strength has brought about many notable changes in the market and this trend may continue, however, over the past two days the major currency pairs have slowed down in preparation for the NFP announcement. The reason for this is that it is still uncertain if the improvement in economic status will translate over to Non-Farm Payroll.

This slowdown is due to uncertainty as to whether the NFP will be positive or negative. If positive we are bound to see the continued strength of the USD. This will also indicate the likelihood of the announcement of lenient interest rates by the FED as the interest rate over the past few months has been hiked to historic levels to combat inflation, but if the economic conditions are improving then the hikes may no longer be necessary.

If it is negative it may undermine this newfound strength of the US dollar and add more fear toward the prediction of an economic recession. That will mean the FED is likely to hike interest rates further or keep them at these high levels, both of which are not good news for the US economy as there are fewer people taking out credit to invest and create economic activity.

How to prepare for NFP

As you can see, the massive uncertainty towards the NFP means there is bound to be massive volatility as there are traders on both sides. This means the market is bound to move in both directions first before moving in its intended direction to stop and confuse a lot of traders. It will be better if you mark out the areas of interest on your chart where there is likely going to be liquidity then trade accordingly when the shows reversal signs AFTER THE ANNOUNCEMENT HAS BEEN MADE. This ensures that you dont try to enter in the middle of the massive volatility and allows you to place reasonable stop losses that will not be touched.