- The Nonfarm Payrolls announcement is scheduled for January 6 at 13:30 GMT.
- The expectations hover around 200K as compared to the previous month’s 263K.
- If the NFP number comes in higher than expectations, investors can expect a short-term selloff in Bitcoin price.
Bitcoin (BTC) price and the general crypto markets have been highly correlated with the stock markets since the COVID-19 crash in March 2020. Since then, macroeconomic news have been affecting Bitcoin, Ethereum and other altcoins, and the Nonfarm Payrolls (NFP) monthly release is one such significant event, with the December version to be published on January 6 at 13:30 GMT.
What are Nonfarm Payrolls?
The Nonfarm Payrolls, also known as NFP, is a measure of the number of workers that are employed during the prior month in the United States (US). The statistic is provided by the Bureau of Labor Statistics (BLS) and excludes jobs like farm workers, government workers, private households, proprietors, and non-profit employees.
Why is NFP important?
According to the BLS, the Nonfarm Payrolls number consists of jobs that directly or indirectly contribute roughly 80% to the United States Gross Domestic Product (GDP). Hence, the NFP provides an important assessment of the job landscape and, in turn, gives an outlook of current market conditions.
Additionally, NFP are also closely scrutinized by the US central bank, the Federal Reserve (Fed), to assess their monetary policy. The Fed does have a double mandate to keep both employment and inflation figures at healthy levels for the economy. Therefore, the measure of the jobs added or lost will set the tone for the upcoming Fed interest rate hike decision.
Here are some quick examples.
Instance 1: If the NFP data for December comes in higher than the prior month, it indicates that more jobs have been added. This is a positive development and will indicate a stronger economy, allowing the US Dollar to strengthen.
A stronger US Dollar is usually negative for the stock market. Hence, a higher Nonfarm Payroll number that exceeds expectations usually causes the stock market to temporarily take a hit. Since the crypto markets have been highly correlated to the traditional markets in recent times, it will likely cause a similar effect on Bitcoin price.
Instance 2: If NFP numbers come in lower than expectations, it may lead to a weaker US Dollar, which will inadvertently cause the stock and crypto markets (including BTC) to rally.
Visualizing crypto vs. NFP
Taking a look at the big picture of Nonfarm Payrolls data vs. Bitcoin price, this provides a generalized view of what has happened so far and what to expect next.
The chart attached below shows that Bitcoin price has almost always dropped when the actual NFP data has come out higher than expectations or forecasts. The only exceptions can be seen in August and December 2022, where BTC saw a short-term uptick despite the weak NFP numbers.
BTC/USD 4-hour chart vs. NFP
December NFP report expectations and ADP
On January 6, the December Nonfarm Payrolls numbers will be announced at 13:30 GMT and the forecasts hover around 200k. To assess where the NFP numbers will land, investors can take a look at the US Automatic Data Processing (ADP) Employment numbers, which were released on Thursday.
ADP tracks the level of nonfarm private employment and is published usually two days before the BLS publishes the NFP numbers – although this week the data came out on Thursday due to the shortened week on New Year celebrations. Hence, market participants can use ADP to get a basic understanding of what to expect from Nonfarm Payrolls.
According to the ADP numbers released on January 5, private employment increased by 235,000 last month as opposed to the expectations of 150,000. Since ADP numbers beat expectations, investors are expecting a similar trend for the NFP.
So, a higher-than-expected number will be better for the US Dollar, which will negatively impact the stock and cryptocurrency markets.
Bitcoin price could tank
Bitcoin price is struggling to overcome the resistance level at $16,836, which is the highest volume traded level since November 5. Interestingly, it also coincides with the midpoint of the larger range that BTC has set up, extending from $15,443 to $18,230.
Since the Relative Strength Index (RSI) is already retracing from the overbought zone, the chances that bulls will make a comeback are slim. Additionally, strong NFP numbers will result in a sell-off for BTC.
A breakdown of the $16,000 psychological level could likely result in a sweep of the equal lows at $15,443.
BTC/USDT 12-hour chart
If the sell-off caused by the announcement of the NFP numbers is followed by a quick rise in buying pressure and a recovery rally, things could favor the bulls. If such a situation happens, the RSI should bounce off the midpoint at 50.
In such a case, Bitcoin price could bounce off the $16,624 support level and trigger another leg-up to $17,306 and even $18,401.
Also Read: Ethereum price may drop 12% before it reaches $1,300
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
US presidential election outcome could shape the future of crypto
US citizens will go to the polls to elect a new president on November 5, and their choice could be key for the future of the crypto industry and thus the price outlook for Bitcoin (BTC).
Bitcoin ETFs beat Gold ETFs with 65% gain since launch
Bitcoin ETFs have reshaped the digital asset investment landscape since their approval in January. Their total assets under management climbed over $70 billion during the weekend, placing them ahead of other investment products, including gold.
XRP eyes 10% rally amid relisting across crypto exchanges and growing institutional demand
Ripple's XRP is trading at $0.5050 up slightly by 0.2% in the past 24 hours as it struggles to sustain a move above a key symmetry triangle resistance. Meanwhile, in its recently released Q3 report, Ripple noted the rising listing and relisting of XRP across crypto exchanges and global platforms.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone. Meanwhile, the State of Michigan pension fund revealed an investment of $11 million in ETH exchange-traded funds.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.