EUR/USD: Trading the US NFP Apr 2014

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.

Update:  Non-Farm Payrolls +192K, good details – market undecided

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 has been steadily rising, and climbed to 175 thousand last month, well above the estimate of 151 thousand. Will the upward trend continue? The markets think so, with the estimate standing at 199 thousand for the March release.

Sentiment and Levels

Recent comments from  Mario Draghi  were a clear indication that the ECB wants to keep EUR/USD from crossing 1.40,  and it probably wants it even lower. Even if the  ECB  does not act on Thursday, the central bank’s rhetoric will probably weaken the currency. Soft German inflation numbers strengthen the notion.

In the US, we see no real retreat from  Yellen’s “6 month from QE end to rate hike” comment, which sent the dollar higher.  US data has been positive, and if this week’s employment releases meet expectations, the dollar should keep its bid. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3895, 1.3830, 1.38, 1.3740, 1.37 and  1.3650.

5 Scenarios

1. Within expectations: 194K to 204K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 205K to 211K: An unexpected higher reading could send the pair below one support line.
3. Well above  expectations: Above 211K: 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:  187K to 193K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
5. Well below expectations: Below 187K. 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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