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. 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.
In the July release, Non-Farm Employment Change rose sharply from 175 to 195 thousand, blowing past the estimate of 163 thousand. This was the indicator’s strongest showing since March. The estimate for the upcoming release is not as high, with an estimate of 180 thousand. Will the indicator again surprise the market with a strong release?
Sentiment and Levels
The Eurozone is showing some signs of improvement. German consumer climate and inflation numbers were healthy, and recent PMI out of France and the Eurozone pointed upwards. Spain is having some political trouble, but there have been some positive economic releases. The unemployment rate dropped for the first time in two years and GDP showed some improvement. Greece received more aid without a fuss, and Portugal is struggling, but remains afloat. So things could certainly be worse on the continent, although there is plenty of room for improvement. Draghi could push the euro lower, as his press conferences seen to have become more important than the ECB rate announcements. At this stage, on change is expected in the record low interest rates of 0.50%.
In the US, economic signs remain mixed. QE tapering isn’t fully priced in, and any hint of action on this front from the Fed could boost the dollar. Barring economic data which jolts the markets, we could see the pair remain fairly steady. So, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3350, 1.33, 1.3255, 1.3175, 1.31 and 1.3050.
5 Scenarios
- Within expectations:172K to 188K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 189K to 197K: An unexpected higher reading could send the pair below one support line.
- Well above expectations: Above 197K: 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.
- Below expectations: 163K to 171K: A weaker reading than forecast could result in EUR/USD pushing above one line of resistance.
- Well below expectations: Below 163K. 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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