EUR/USD: Trading the US NFP Feb 2016

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 have a sharp effect on the direction of EUR/USD.

In December, Nonfarm Employment Change jumped to 292 thousand, crushing the estimate of 203 thousand.  The markets are braced for a much weaker figure in the January report, with the forecast standing at 189 thousand.

Sentiment and Levels

The euro has posted sharp gains this week, supported by safe haven flows: concerns about the global and US economies and the collapse of oil. Worries about the US economy has pushed back the next US rate hike, which is seemingly  positive as well for EUR/USD, but due to the positive nature of not raising rates, the safe haven flows are watered down. The mixed picture continues with the ECB: it’s unclear if Draghi will have the upper hand on more easing. All in all, we could see another week of choppiness.  So, the overall sentiment  is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.13, 1.1220, 1.1140, 1.1050 and 1.10.

5 Scenarios

1. Within expectations: 186K to 192K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 193K to 197K: An unexpected higher reading could send the pair  below one support  line.
3. Well above expectations: Above 197K: Such an outcome could  push the pair lower and two or more  support lines could  fall as a result.
4. Below expectations:  181K to 185K: A  weaker reading  than forecast could result in EUR/USD breaking above one resistance line.
5. Well below expectations: Below 181K. In this scenario, the pair could break through two or more resistance lines.

For more about the euro, see the EUR/USD forecast.