US Unemployment Claims is released weekly, and measures the number of people filing for unemployment for the first time. It is considered an important measure of the health and direction of the US economy. A reading which is higher than the market forecast is bullish for the euro.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Thursday at 12:30 GMT.
Indicator Background
Analysts closely monitor employment data, and Unemployment Claims provides them the opportunity to track the US employment picture on a weekly basis. The labor market is highly correlated with economic growth, as an increase in employment will result in greater consumer confidence and an increase in consumer spending. In turn, increased consumer spending leads to further growth in the economy.
Unemployment Claims looked very sharp last week, as the indicator dropped to 334 thousand new claims, well below the estimate of 354K. The markets are expecting a higher figure in the upcoming release, with an estimate of 343K. Will the indicator repeat and come in below expectations?
Sentiments and levels
The euro continues to hold its own, and we are seeing less pressure on the currency now that Draghi put negative rates on the backburner, at least for the time being. At the same time, the economic situation in Eurozone is not good. The large economies are also struggling and the ECB actually downgraded its forecasts. Recent PMIs could serve as a stark reminder of the ongoing recession in Europe, which will continue to weigh on the euro.
In the US, economic releases continue to remained mixed: while jobless claims and retail sales exceeded expectations, consumer sentiment fell. The Fed has hinted at tapering QE, and although it may not act for quite some time, speculation about scaling back Fed purchases is bullish for the dollar. So, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3480, 1.3434, 1.34, 1.3350, 1.3255 and 1.32.
5 Scenarios
- Within expectations: 339K to 347K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 348K to 351K: An unexpected higher reading can send the pair above one resistance line.
- Well above expectations: Above 351K: Weak employment numbers would be bearish for the dollar. Two or more resistance lines could be broken on such an outcome.
- Below expectations: 335K to 338K: A positive reading could push EUR/USD lower, and one support line could be broken.
- Well below expectations: Below 335K. A sharp decrease in unemployment claims could lead to the pair breaking two or more support levels.
For more on the Euro, see the EUR/USD forecast.
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