EUR/USD: Trading the US NFP Aug 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.

Update:  Non-Farm Payrolls +209K, unemployment rate 6.2%- USD falls

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 May,  Nonfarm Payrolls  was  excellent,  climbing  to 288  thousand.  This easily beat the estimate of 214 thousand.  The markets are bracing for a soft reading for June, with the estimate at just 230 thousand. So we could see a repeat of the ADP Nonfarm Payrolls report, which weakened last month.

Sentiment and Levels

With inflation numbers coming out of the euro-zone, we will probably get a stark reminder of why the ECB is in an ultra-easing policy, and that’s here to stay, especially as German business confidence slides and France is still lagging behind.  In the US, a sparkling GDP will add pressure on the Fed to tighten interest rates. Recent data is quite encouraging. The  “buy the dips” mode that characterized the pair’s trading for a long time seems to have vanished: bad news sticks. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.35, 1.3450, 1.34, 1.3335, 1.3295 and 1.32.

More:  EUR/USD and USD/JPY pre NFP Elliott Wave Analysis

5 Scenarios

1. Within expectations: 225K to 235K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 236K to 248K: An unexpected higher reading could send the pair below one support line.
3. Well above expectations: Above 248K: 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:  212K to 224K: A  weaker reading  than forecast could result in EUR/USD pushing above one line of resistance.
5. Well below expectations: Below 212K. 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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