EUR/USD: Trading the US Unemployment Claims Aug 2014

US  jobless claims are released weekly and serve as a constant barometer for the health of the job market. Despite the volatile nature of the frequent report, it has a significant impact on the dollar, especially as the figures have recently dropped several times below the 300K mark, indicating a break from the previous range and an encouraging sign.

Update:  US jobless claims falls to 298K – USD marginally stronger

Here are the details and 5 possible outcomes for EUR/USD.

Published on Thursday at 12:30 GMT.

Indicator Background

Employment is one of the Federal Reserve’s two mandates so every related indicator influences the exchange rate markets; we can assume that policymakers are affected as well.  An  unexpected reading can affect the direction of EUR/USD.

Unemployment Claims disappointed last week, climbing to 311 thousand,  which was above the estimate of 307 thousand. However, the four-week average, which is a more accurate gauge of the indicator’s trend, remains at low levels. The estimate for the upcoming release stands at 299 thousand.

Sentiment and Levels

With the Eurozone continuing to limp along, we continue to see a divergence in economic performance between the steadily growing United States (despite some bumps) and the  lack of growth and inflation in the Germany, France and  Italy.  This goes hand in hand with monetary policy that is also going in  separate directions. The forward-looking PMIs could  now point continued weakness in the euro-zone also in the months ahead. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3415, 1.3333, 1.3295, 1.3250, and 1.3175

5 Scenarios

1. Within expectations: 294K to 304K. In such a scenario, the EUR/USD is likely to rise within  range, with a small chance of breaking higher.
2. Above expectations: 305K to 312K: An unexpected higher reading could send the pair  above one  resistance line.
3. Well above expectations: Above 312K: The chances of such a scenario are low. Such an outcome could  prop up the pair, and a second  resistance line could  break as a result.
4. Below expectations:  286K to 293K: A  weaker reading  than forecast could result in EUR/USD dropping below one support level.
5. Well below expectations: Below 286K. In this scenario, the pair could break through a second support level.

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

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