EUR/USD: Trading the US Non-Farm Payrolls

Forex Crunch:

US Nonfarm Employment Change measures the change in the number of newly employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar. Here are the details and 5 possible outcomes for EUR/USD.

Published on Friday at 13:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The release of US Non-Farm Employment Change is highly anticipated by the markets, and an unexpected reading can affect the direction of EUR/USD.

Nonfarm Employment Change slid in November, coming in at 211 thousand. This was much weaker than the previous release of 271 thousand. Still, the December report beat the estimate of 201 thousand. The downward trend is expected to continue, with the estimate standing at 203 thousand.

Sentiment and Levels

The Eurozone economy has shown some improvement, but lackluster euro-zone inflation means that the ECB could still introduce more easing early in 2016. With the Fed set to hike again, monetary divergence will continue to weigh on the euro. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1050, 1.10, 1.0925, 1.0850, 1.08 and 1.0710.

5 Scenarios

  1. Within expectations: 199K to 207K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 208K to 212K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 212K: The chances of such a scenario are low. Such an outcome could push the pair lower and two or more support lines could fall as a result.
  4. Below expectations: 194K to 198K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
  5. Well below expectations: Below 193K. In this scenario, the pair could break through two or more resistance lines.