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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 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.

Non-Farm Employment Change dropped to 148 thousand in September, compared to 169 thousand the month before. This was well off the estimate of 182 thousand. The estimate for  October is down to 121 thousand, but it should be  noted that the  government shutdown in October resulted in  some workers  being removed from payrolls, which would explain the low October forecast.

Sentiment and Levels

The Euro-zone  continues to struggle.  In addition to the persistent problem of deflation, the  region is grappling  with rising unemployment and a danger of a credit crunch. Draghi will be forced to send a strong message and meet fundamentals and expectations. He will probably refrain from using the “nuclear option” of a negative deposit rate, but a path for an LTRO and /or a rate cut could be enough for the next leg lower.

In the US, recent PMIs have looked strong, but the  employment situation remains muddy, especially after the US shutdown, which led to the layoffs of hundreds of thousands of government workers. The uncertainty over QE tapering, which had been weighing on the dollar, has eased, since the Fed is unlikely to take any action before 2014. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3710, 1.3650, 1.3570, 1.35, 1.3460 and  1.3415

5 Scenarios

  1. Within expectations: 117K to 125K. In such a scenario, the EUR/USD is likely to rise  within  range, with a small chance of breaking higher.
  2. Above expectations: 126K to 131K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 131K: 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:  111K to 116K: A  weaker reading  than forecast could result in EUR/USD  breaking above one line of resistance.
  5. Well below expectations: Below 111K. In this scenario, the pair could break above a second resistance line.

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

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