Home EUR/USD: Trading the US Unemployment Claims Aug 2013

EUR/USD: Trading the US Unemployment Claims Aug 2013

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  should translate into  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 326 thousand new claims, well below the estimate of 346K. The markets are expecting a higher figure in the upcoming release, with an estimate of 336K. Will the indicator repeat and beat the estimate?

Sentiments and levels

The ECB sounded a bit more upbeat about the Eurozone, but  it continues to maintain a dovish bias and has not removed the option of  cutting  rates even further. A recovery in the euro-zone is yet to materialize, and political crises in Italy and Spain are still brewing.  In the US, NFP  failed to  meet the elevated expectations, but the economy is still creating jobs and growing at a respectable clip. While we didn’t get a smoking QE tapering gun, the Fed’s course in reducing the current stimulus level  is clear and seems likely in the next few months.

EUR/USD  didn’t  show much movement, even though the ECB wasn’t negative and US NFP disappointed. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.34, 1.3350, 1.33, 1.3255, 1.3175  and  1.31.

5 Scenarios

  1. Within expectations: 333K to 339K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 340K to 344K: An unexpected  higher reading can send the pair  above one resistance line.
  3. Well above  expectations:  Above 344K:  Weak employment numbers would be bearish for the dollar. Two or more  resistance lines  could be broken on such an outcome.
  4. Below expectations: 328K to 332K: A positive reading could push EUR/USD lower, and one  support  line could be broken.
  5. Well below expectations: Below  328K. 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.

To follow this event live:   [do action=”calendar-event” eventid=”9c689bbf-af2a-4f65-81a8-c5f5e2b78d70″/]

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.