Home EUR/USD: Trading the US NFP Jul 2013

EUR/USD: Trading the US NFP Jul 2013

US Non-Farm 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 12:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of EUR/USD.

Non-Farm Employment Change has looked solid in  recent readings, as the  US economy seems to be  picking up steam. In June, the indicator came in at 175 thousand, beating the estimate of 167 thousand.  The forecast for July is  not as strong, with an  estimate of 162 thousand. Will the indicator post a  strong release and beat the forecast?

Sentiment and Levels

The ECB showed confidence last month, but Mario Draghi is likely to become more worried, especially as the yields are rising and the debt crisis could make a comeback. The negative deposit rate and QE could be put on the table, and such talk has hurt the euro in the past. While the situation in Germany may be improving, the euro-zone economies are far from getting out of the woods.

In the US,  economic data looked strong, and  confidence in the US recovery is  increasing,  so the dollar will likely remain well bid, keeping pressure on the euro. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.31, 1.3050, 1.30, 1.2940, 1.2890 and 1.2840.

5 Scenarios

  1. Within expectations:156K to 168K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 169K to 175K: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 175K: The chances of such a scenario are low. Such an outcome would prop up the pair, and a second support line could fall as a result.
  4. Below expectations:  149K to 155K: A  weak reading  could result in EUR/USD  pushing above one line of resistance.
  5. Well below expectations: Below 149K. In this scenario, the pair could move above a second resistance line.

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

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.