EUR/USD: Trading the Non-Farm Employment Change

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The Non-Farm Employment Change indicator, released by the US Government, measures the change in the number of 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, such as the Non-Farm Employment Change, is highly anticipated by the markets. Traders should be note that an unofficial indicator, the ADP Non-Farm Employment Change, was released earlier in the week, prior to the official US Government release. It posted a very weak reading of 119K in April, well below the market forecast of  178K.

In April, the official Non-Farm Employment Change was a major disappointment. The April reading of 120K was nowhere near the market forecast of 207K, and was the lowest reading since last December. The market estimate for May stands at a much improved figure of 176K. Can the indicator deliver the goods this month?

Sentiment and Levels

Spain is in serious trouble, suffering a toxic mix of economic troubles. The situation is not much better elsewhere in the Euro-zone, with the small players as well as the large economies of Germany, France and Italy all struggling. The markets are worried about the elections in Greece and France next week, with the projected results not too favorable for the euro. The euro’s tumble on weak employment data earlier this week was a stark reminder of the fragility of the euro. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels from top to bottom: 1.33, 1.3212, 1.3135, 1.3080, 1.30 and 1.2945.

5 Scenarios

  1. Within expectations: 170K to 182K: In this scenario, EUR/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations: 183K to 189K: A reading above expectations would signal economic expansion, and could push the pair below one support level.
  3. Well above expectations: Above 189K: A sharp rise in employment numbers could push EUR/USD downwards, and two or more support levels could be broken.
  4. Below expectations: 163K to 169K: The pair could rise on a weak reading, with one resistance line at risk.
  5. Well below expectations: Below 163K: Such a scenario would be bearish for the dollar, and EUR/USD could break two or more resistance lines.

For more on the Euro, see the EUR/USD forecast.

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About Author

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.