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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  the Non-Farm Employment Change  is highly anticipated by the markets, and an unexpected reading could affect the direction of EUR/USD.

In the May reading, Non-Farm Employment Change looked very sharp, rising from 88 thousand to 165 thousand. This easily beat the estimate of 146 thousand. The estimate for the June reading stands at 167 thousand. Will the indicator again surprise the market with a strong release?

Sentiment and Levels

The markets  have their hands full   with Europe and its issues:  an ongoing recession, the call for the ECB to “manage the euro lower“ and  the  talk about negative rates  which now culminates in the upcoming  rate decision. Even if the ECB does not tamper with the rates, Draghi is likely to drag the euro lower, given the sorry state of the euro-zone. And while bond yields of Italy and Spain remain low, recent auctions show that they could rise once again, especially after we have seen once again that the Japanese are not buying foreign bonds, but actually selling them.

In the US, there is growing speculation that the Fed  will  scale down  QE,  even though US numbers are  mixed.  Fed policymakers have dropped large hints, and  there is  a growing notion it will happen this year. Jobs are the key. A reduction in QE is bullish for the US dollar, so any discussion about this by the Fed could boost the greenback. So, the overall sentiment is bearish on EUR/USD towards this release.

 

Technical levels, from top to bottom: 1.3255, 1.32, 1.3160, 1.3100, 1.3150 and 1.3000

5 Scenarios

  1. Within expectations: 161K to 173K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 174K to 180K: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 180K: 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: 154K to 160K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
  5. Well below expectations: Below 154K. In this scenario, the pair could break  through a second resistance line.

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

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