Home EUR/USD: Trading the US NFP Jan 2014

EUR/USD: Trading the US NFP Jan 2014

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 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 could affect the direction of EUR/USD.

Despite concerns about dips in employment numbers following the October  government shutdown, Non-Farm Payrolls has looked sharp, with readings just above the 200 thousand level for the past two months, easily surpassing the estimates.  The estimate for December stands at 194 thousand. Will the indicator again beat the estimate?

Sentiment and Levels

As we move into 2014, the picture is not a bright one for the Eurozone as we move into 2014. Tighter credit conditions in the Eurozone are weighing on growth and could send the  bloc back to recession. German numbers have looked good and Spanish data has been a pleasant surprise, but France and Italy continue to struggle. With weak inflation and growth in the bloc,  the ECB could take some action at this week’s policy meeting.

In the US, the situation is considerably brighter. Unemployment Claims have dropped nicely and the ADP Non-Farm Payrolls  jumped to a two-year high. This has  raised expectations of an accelerated QE taper, which would  bolster the dollar.  The breakdown of support and the return to the lows seen in December are also a warning sign. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.38, 1.3710, 1.3615, 1.3440, 1.3320, and 1.3240.

5 Scenarios

  1. Within expectations:189K to 199K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
  2. Above expectations: 200K to 208K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 208K: The chances of such a scenario are low. Such an outcome could  prop up the pair, and a second support line  could fall as a result.
  4. Below expectations:  190K to 198K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
  5. Well below expectations: Below 190K. 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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More:  This week’s Non-Farm Payrolls should be bullish for USD

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.