EUR/USD: Trading the US NFP Dec 2013

US Non-Farm Employment Change  is  one of the most important economic indicators. It  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  components of economic growth.  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  was stellar  in  October, rising  to 204 thousand, way above the estimate of 121 thousand. However, this release  covered the period of the government shutdown, so the reading may have been skewed. The estimate for the  November reading stands at 180 thousand. If the indicator can beat the forecast, the dollar could gain ground against the euro.

Sentiment and Levels

The ECB  stayed the course and  maintained  interest rates at 0.25%,  in large part due to  stronger than expected inflation numbers. At the same time, inflation is still low, money supply is short and the euro is painfully strong for many countries. Draghi could certainly place the “nuclear” option of a negative deposit rate higher on the agenda, hinting about a move in Q1. This could at least allow for a consolidation of recent gains.

Over in the US, the  Fed could still taper in December, especially after it was successful in separating expectations for a rate hike from QE tapering.  Recent key US releases have looked sharp, notably ADP Non-Farm Payrolls and New Home Sales.

So, the overall sentiment is  bearish 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

1. 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.
2. Above expectations: 189K to 197K: An unexpected higher reading could send the pair below one support line.
3. 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.
4. Below expectations:  163K to 171K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
5. 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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