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.
Update: Non-Farm Payrolls + 295K – excellent news – USD higher
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 continues to look sharp and has exceeded the forecast for three straight readings. The indicator improved to 257 thousand in the January report, easily beating the forecast of 236 thousand. However, the markets are braced for a softer reading in February, with an estimate of 240 thousand. Will the indicator again beat this prediction?
Sentiment and Levels
With Greece receiving a four-month bailout extension, the crisis will be on the backburner for a while. This means that monetary policy divergence is back in the spotlight and it doesn’t bode well for EUR/USD. ECB head Mario Draghi is unlikely to make any moves at the policy meeting, but with euro-zone QE commencing in March, the euro is likely to weaken, even if deflation doesn’t further deepen. In the US, Janet Yellen testimony in Congress basically prepared us for the removal of forward guidance, and a strong NFP could boost the June rate expectations. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1270, 1.12, 1.1113, 1.10, 1.0760 and 1.05.
5 Scenarios
- Within expectations: 236K to 244K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 245K to 249K: An unexpected higher reading could send the pair below one support line.
- Well above expectations: Above 249K: 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.
- Below expectations: 231K to 235K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
- Well below expectations: Below 231K. In this scenario, the pair could break through two or more resistance lines.
For more about the euro, see the EUR/USD forecast.
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