Forex Trading Basic

Fundamental Analysis: Employment / Unemployment

How to Trade with Triangle Chart Patterns

Employment tells us about the health of large economies where job creation is the very first indicator of consumer spending: more employers mean more investment which helps businesses to get a higher revenue and less workers mean less investment, less revenue. Howover, less employment data can tell investors to sort their capital out to more favorable country and improve their employment data which can lure them to pour more capital into the economy.

Impact on Forex and Economy

High amount of employment can be a boost to the currency and economy, as investors think it as a sign of a healthy economy. More people working means more spending, which is favorable in large economies where consumer spends to represents the majority of economic activity. Moreover, traders will see the higher unemployment from the eyes of a central banker who might be inclined to low their interest rates to encourage to borrow and spend the job growth. Interest rate decrease will in turn cause the global investors to shy away from the currency and search for higher yields some where else.

Economic Calendar Events

There are couple of different ways to report the employment numbers:

1. Initial Jobless Claims (US) And Continuing Jobless Claims (US):

  • Impact: High (Initial) and Medium (Continuing)
  • Countries: US
  • Frequency: Weekly

The Initial Jobless Claims tells the number of individuals who filed for unemployment insurance for the very first time during the past week and represents the earliest U.S. economic data. Continuing with  the Jobless Claims,which is released at the same time are as the initial figures, which measures the number of unemployed individuals who are qualify for benefits under unemployment insurance.

2. Nonfarm Payrolls

  • Impact: High
  • Countries: US
  • Frequency:Monthly

It tells the change in the number of people who are employed during the previous month, excluding the farming industry.

3. Unemployment Rate

  • Impact: Medium
  • Countries: Most
  • Frequency: Monthly

The Unemployment Rate gives the percentage of the total work force who are unemployed and actively searching employment during the previous month,that is what  expressed as a percentage.

For traders, the rule of thumb is as below:

Difference in Forecast and Actual: Claims Payroll #
or Unemployment %
Currency EffectReason
Lower claims, higher payroll, lower unemployment than forecastStrengthens CurrencyForecasts improved GDP (positive for currency)
and less concern about central bank lowering interest rates to stimulate the economy.
Higher claims, lower payroll, higher unemployment
than forecast 
 Weakens CurrencyForecasts weakening GDP (negative for currency)
and more concern about central bank lowering interest rates (negative for currency) to encourage borrowing to spur economy.

Of all the events describes above, the US nonfarm payrolls is indeed the biggest event, as United States is very much dependent on the growth of new jobs to fuel its consumer spending economy. Sometimes the rate of a region of unemployment can be more muted due to lag time or more stopped due to the fact that consumer spending is not a big      driver  of         the       economy.

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Please note that: gaining profit from fundamental analysis largely depends on your brokers MT4 platform functions. If your broker is vulnerable to high slippage problem during the time of news release, you are not going to get expected result from trading. So, while Choosing Forex broker, we would like to recommend you to start trading with a broker that has slippage guard. We recommend you to trade with HYCM Broker to get the best possible outcome of forex trading fundamental analysis. Read review of HYCM Broker to learn more on this

Chapter 6

Forex Trading Fundamental Analysis

Lesson 1.Forex Trading Fundamental analysis
Lesson 2Forex Trading Fundamental analysis
Lesson 3Fundamental Analysis of Interest Rates
Lesson 4Fundamental Analysis of Inflation Rates
Lesson 5Fundamental Analysis on Balance of Trade
Lesson 6Fundamental Analysis on Government Factors
Lesson 7Fundamental Analysis: Employment / Unemployment
Lesson 8Fundamental Analysis on GDP
Lesson 9Fundamental Analysis on Geopolitical Risks

Go back to Main Page: Forex Trading for Beginners

About the author

Syed Nazim

Syed Nazim is the Marketing Manager of RedMaroon, a Digital Marketing Agency for Financial Institutions. He is also involved with Forexing24.com as a writer and financial Analyst. He is a brilliant marketing geek with vast experience in every sector of Digital Marketing. He likes sharing strategies, tactics and proven methods to help you build a business and live the life of your dreams.

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