EUR/USD: Trading the US NFP Nov 2014

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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.

Update: NFP +214K, good internal data

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 can affect the direction of EUR/USD.

Non-Farm Employment Change bounced back last month with a strong gain of 248 thousand, well above the estimate of 216 thousand. The estimate for the upcoming release stands up 229 thousand. Will the indicator repeat and beat the forecast?

Sentiment and Levels

The prognosis looks grim for the Eurozone, which has been suffering from very low inflation and weak growth, with a central bank that is looking for ways to expand its balance sheet, taking a page out of the book of the Federal Reserve. In the US, QE has just ended, the economy advances nicely and the next move is a rate hike. Despite a lower value of the euro in recent months, inflation hasn’t picked up. The Eurozone will need an even weaker euro in order to recover, and the ECB could take steps in that direction. So, the overall sentiment remains bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.27, 1.2660, 1.2570, 1.25, 1.2545 and 1.2385.

5 Scenarios

  1. Within expectations: 226K to 232K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 233K to 239K: An unexpected higher reading could send the pair below one support line.
  3. Well above expectations: Above 239K: The chances of such a scenario are low. Such an outcome could push the pair lower, and two or more support lines could fall as a result.
  4. Below expectations: 219K to 225K: A weaker reading than forecast could result in EUR/USD breaking above one resistance line.
  5. Well below expectations: Below 219K. In this scenario, the pair could break through two or more resistance lines.

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

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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