Cryptocurrency Beginner’s Guide to Off-Farm Wage and its Impact on BTC

  • The Non-Farm Payrolls announcement is scheduled for 13:30 GMT on January 6.
  • Expectations are around 200K compared to 263K last month.
  • If the NFP number is higher than expected, investors can expect a short-term sell-off in the Bitcoin price.

Bitcoin (BTC) price and overall cryptocurrency markets have been highly correlated with stock markets since the March 2020 COVID-19 crash. Since then, macroeconomic news has affected Bitcoin, Ethereum and other altcoins and Non-Farm Payrolls (NFP). the monthly edition is one such milestone, with the December version set to be published on January 6 at 1:30 PM GMT.

What is Off-Farm Wage?

Non-Farm Payrolls, also known as NFP, is a measure of the number of workers employed in the United States (US) during the previous month. The statistics are provided by the Bureau of Labor Statistics (BLS) and exclude occupations such as farm workers, government workers, private households, proprietors, and non-profit workers.

Why is NFP important?

According to the BLS, the Nonfarm Payroll number consists of jobs that directly or indirectly contribute about 80% of the United States’ Gross Domestic Product (GDP). Thus, the NFP provides an important assessment of the business landscape and, in turn, provides a forecast of current market conditions.

In addition, the NFP is also closely scrutinized by the US central bank, the Federal Reserve (Fed), to evaluate monetary policy. The Fed has a dual mandate to keep both employment and inflation numbers at healthy levels for the economy. Therefore, the measurement of jobs added or lost will set the tone for the Fed’s upcoming rate hike decision.

Here are some quick examples.

Example 1: If the NFP data for December comes in higher than the previous month, it indicates that more jobs were added. This is a positive development and will signal a stronger economy allowing the US dollar to strengthen.

A strong US Dollar is usually negative for the stock market. So a higher Non-Farm Payroll figure that beats expectations usually causes the stock market to take a temporary hit. Since cryptocurrency markets have been highly correlated with traditional markets in recent times, this is likely to have a similar effect on the price of Bitcoin.

Example 2: If the NFP numbers come in below expectations, this could lead to a weaker USD, which would lead to a rally in the stock and cryptocurrency markets (including BTC).

Visualizing cryptocurrency with NFP

Looking at the big picture of non-farm payrolls data against the price of Bitcoin provides an overview of what has happened so far and what to expect next.

The chart below shows that Bitcoin price almost always falls when actual NFP data comes out higher than expectations or forecasts. The only exceptions can be seen in August and December 2022, where BTC saw a short-term rally despite weak NFP numbers.

BTC/USD vs NFP 4 hour chart

December NFP report expectations and ADP

On January 6, the December Non-Farm Payroll numbers will be released at 13:30 GMT and forecasts hover around 200k. To gauge where the NFP numbers will fall, investors can look to the US Automatic Data Processing (ADP) Employment numbers released on Thursday.

The ADP tracks the level of nonfarm private employment and is usually published two days before the BLS publishes the NFP numbers — although this week’s data came out on Thursday due to the New Year’s shortened week. So, market participants can use ADP to understand what to expect in Non-Farm Labor Wages.

According to ADP figures released on January 5, private employment increased by 235,000 last month, compared to expectations of 150,000. As ADP numbers beat expectations, investors expect a similar trend for NFP.

So, a higher than expected figure will be better for the US Dollar, which will have a negative impact on the stock and cryptocurrency markets.

The price of Bitcoin may fall

Bitcoin price is struggling to break the resistance level at $16,836, the highest trading volume since November 5th. Interestingly, this also coincides with the midpoint of the broader range that BTC established from $15,443 to $18,230.

As the Relative Strength Index (RSI) has already retreated from the overbought zone, the bulls have little chance of a comeback. Additionally, strong NFP numbers will result in a sell-off for BTC.

A breach of the $16,000 psychological level would likely result in a sweep of the lows at $15,443.

BTC/USDT 12 hour chart

BTC/USDT 12 hour chart

Things could turn in the bulls’ favor if the sell-off triggered by the release of the NFP numbers is followed by a quick pick-up in buying pressure and a recovery rally. If such a situation occurs, the RSI should retrace its midpoint at 50.

In such a situation, the price of Bitcoin may decline from the support level of $16,624 to $17,306 and even rise to $18,401.

Also Read: Ethereum Price May Fall 12% Before Reaching $1,300

Source link